EN  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 10 August 2005 
at the request of the Central Bank of Cyprus 
on a draft law amending the Settlement Finalit y in Payment Systems and Securities Settlement 
Systems Law of 2003 
(CON/2005/28) 
 1. On 15 July 2005, the European Central Bank (ECB) received a request from the Central Bank of 
Cyprus (CBC) for an opinion on a draft law ame nding the Settlement Finality in Payment Systems 
and Securities Settlement Systems Law of 2003 (hereinafter the ‘draft law’).  
2. The ECB’s competence to deliver an opinion is base d on the third and fifth indents of Article 2(1) 
of Council Decision 98/415/EC of 29 June 1998 on th e consultation of the European Central Bank 
by national authorities regarding draft legislative provisions
1 and Article 25.1 of the Statute of the 
European System of Central Banks and of the Eur opean Central Bank, as the draft law relates to: (i) 
the CBC, a national central bank; (ii) payment an d settlement systems; and (iii) the scope and 
implementation of Community legislation relating to the stability of the financial system. In accordance with the first sentence of Article 17.5 of the Rul es of Procedure of the European 
Central Bank, the Governing Council has adopted this opinion. 
3. The ECB notes that the main purpose of the draf t law is to address a number of discrepancies 
between Directive 98/26/EC of the European Pa rliament and of the Council of 19 May 1998 on 
settlement finality in payment and securities settlement systems
2 (hereinafter the ‘Directive’) and 
certain provisions of the Settlement Finality in Payment Systems and Securities Settlement Systems Law of 2003 (hereinafter the ‘SFL’), implementing the Directive into Cypriot law. The discrepancies addressed by the draft law relate to the SFL’s coverage of: (i) voluntary winding-up 
of participants in a payment and securities settlement  system; and (ii) systems governed by the law 
of another Member State and operating in another Member State. The ECB notes that these discrepancies have previously b een identified and welcomes the action of the CBC to address them. 
4. Section 4 of the draft law provides that, in th e event of voluntary liquidation proceedings, the 
moment of the opening of such proceedings is to be the moment when the voluntary winding-up 
resolution is adopted, thereby bringing voluntary liq uidation proceedings within the scope of the 
                                                     
 
1  OJ L 189, 3.7.1998, p. 42. 
2  OJ L 166, 11.6.1998, p. 45. 
 
2 SFL. Moreover, the draft law provides that, follo wing the adoption of a voluntary winding-up 
resolution, the participant subject to liquida tion proceedings shall immediately notify such 
resolution to the competent authority, which shall inform the ECB and the competent authorities of 
the other Member States. 
5. Sections 3 and 5 of the draft law, read in conj unction with Section 2, provide that the SFL shall 
apply to any payment and securities settlement system governed by the law of a Member State and operating in any currency or in various currencies which the system converts one against another. 
This unequivocally extends the coverage of th e SFL to payment and securities settlement systems 
which are governed by the law of another Member  State and which have not been designated by 
the CBC but instead by the competent au thority of another Member State.  
6. On the basis of the above, the ECB welcomes the core  objective of the draft law, which is to amend 
the SFL in the interests of achieving legal certainty and eliminating the legal risks inherent in the 
participation of institutions est ablished in Cyprus in payment and securities settlement systems. 
The Directive represents an important step towa rds providing certainty with regard to the 
determination of the applicable law and to th e insulation from insolvency proceedings of 
transactions and assets provided as collateral with in a payment and securities settlement system. 
The ECB welcomes measures taken by Member States for the proper application of the provisions of the Directive and for securing the achievement of its aims.
 
7. The ECB further notes that, while it does not comment in detail on individual provisions of the 
draft law, these do not appear to raise concerns of substance, as they are generally consistent with 
the purpose of the draft law as well as with the provisions and purposes of the Directive.  
8. This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 10 August 2005. 
 
[ signed ] 
 
The President of the ECB 
Jean-Claude TRICHET