Q&A: The escrow account

Q. BP has been asked to put $20bn into an escrow account, what is it?
A. An escrow account is a third party account set up to hold funds, usually in a bankruptcy, as a security measure to ensure relevant parties are paid during extraordinary circumstances.
Q. Why has the US asked BP to set up an escrow fund?
A. US President Barack Obama has told BP that it must set up the fund to ensure the company has enough cash to foot the entire clean-up bill.
Q. If BP sets up the account, who will control it?
A. If Obama forces BP to set up the fund, it will be controlled by an escrow agent appointed by the government. However, if BP sets up the fund on its own, the oil group will choose which financial institution to regulate it.
Q. Where will the money come from?
A. BP is debating this. It is a possibility the group’s quarterly dividend could be used to fund it.