Help Print this page 
Title and reference
Settlement finality in payment and securities settlement systems

Summaries of EU legislation: direct access to the main summaries page.
Multilingual display
Text

Settlement finality in payment and securities settlement systems

Transfers and payments of financial products must be regulated to avoid major risks, especially those linked to the insolvency of participants - in the transaction. This EU law lays down rules to minimise such risks.

ACT

Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems.

SUMMARY

Transfers and payments of financial products must be regulated to avoid major risks, especially those linked to the insolvency of participants - in the transaction. This EU law lays down rules to minimise such risks.

WHAT DOES THIS DIRECTIVE DO?

It guarantees that financial product transfer and payment orders can be finalised, mainly by mitigating problems arising from a participant’s insolvency. These participants may be:

financial institutions, e.g. banks;

systems operators, such as central securities depositories.

KEY POINTS

Transfer orders are irrevocable

Transfer orders of financial products are contractually enforceable. This is also applicable to any associated payment netting, situations where debt and claims are offset between participants.

The rules apply even when a participant is subject to insolvency proceedings, as long as the transfer order was underway before the proceedings started. The rules may also apply up to 24 hours afterwards to cover situations where transactions are entered into at times when relevant records are unavailable, for instance overnight.

Uniform rules

The directive seeks to ensure that uniform rules are applied where multiple settlement and payment systems are in operation from the moment the transactions are entered into in order to avoid difficulties arising from incompatible regulations.

Guarantees in insolvency situations

The existence of insolvency proceedings against a participant does not retroactively affect the rights and obligations of other participants nor their access to the normal financial guarantees inherent in a transaction.

WHEN DOES THE DIRECTIVE APPLY?

It originally took effect in 1998, since when it has been amended several times.

For more information, see the financial services and capital markets union page of the European Commission’s website.

REFERENCES

Act

Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 98/26/EC

11.6.1998

11.12.1999

OJ L 166 of 11.6.1998, pp. 45-50

Amending act(s)

Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2009/44/EC

30.6.2009

30.12.2010

OJ L 146 of 10.6.2009, pp. 37-43

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331 of 15.12.2010, pp. 120-161

Regulation (EU) No 648/2012

16.8.2012

-

OJ L 201 of 27.7.2012, pp. 1-59

Regulation (EU) No 909/2014

17.9.2014

-

OJ L 257 of 28.8.2014, pp. 1-72

Successive amendments and corrections to Directive 98/26/EC have been incorporated in the basic text. This consolidated version is for reference purposes only.

Last updated: 03.12.2014

Top