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Document 01998L0026-20190627
Settlement finality in payment and securities settlement systems
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
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:
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 |
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 |
|
Directive 2010/78/EU |
4.1.2011 |
31.12.2011 |
|
Regulation (EU) No 648/2012 |
16.8.2012 |
- |
|
Regulation (EU) No 909/2014 |
17.9.2014 |
- |
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 update 03.12.2014