Banking and investment services: Settlement finality in payments - Directive on settlement finality adopted on 27 April by the Commission

The Council adopted, on 27 April 1998, the Directive on settlement finality in payment and securities settlement systems, thereby concluding the legislative procedure for this Directive. In adopting the Directive, the Council was able to accept the three amendments put forward by the European Parliament in January dealing with transfer orders entered into a system after insolvency proceedings have been opened against a participant, and with the conditions Member States may impose on payment and securities settlement systems.

The Directive is designed to ensure stability in the financial markets and the smooth operation of payment systems in EMU. It sets rules on settlement finality and collateral security to minimise the risk that the bankruptcy or failure of one party in a payment system could lead to other parties going bankrupt. In particular, it stipulates that transfer orders and netting are legally enforceable and binding on third parties in the event of insolvency proceedings against a participant in a system and that collateral security provided in connection with participation in a system will not be affected by insolvency proceedings against the participant which provided the collateral security.

The Directive, in addition, covers collateral security provided in connection with operations of the central banks of the Member States and the future European Central Bank.