EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 29 April 2011 
on amendments to the legislation on settlemen t finality and financial collateral arrangements 
(CON/2011/41) 
 Introduction and legal basis
 
On 4 April 2011, the European Central Bank (ECB ) received a request from the Nationale Bank van 
België/Banque Nationale de Belgique  (NBB), acting on behalf of the Belgian Ministry of Finance, for an 
opinion on a draft law amending the law on settlement finality and the law concer ning financial collateral 
arrangements (hereinafter the ‘draft law’)1.  
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union, and the second, fi fth and sixth indents of Article 2(1) of Council 
Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national 
authorities regarding draft legislative provisions2, as the draft law contains provisions on means of 
payment, payment and settlement systems, as well as ru les applicable to financia l institutions insofar as 
they materially influence the stability of financial institutions and markets. In  accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion. 
 1.  Purpose of the draft law 
1.1 The main objective of the draft law is the tr ansposition into Belgian law of Directive 2009/44/EC
3. 
To this end, the draft law amends the Law on settlement finality in payment and securities 
settlement systems4 and the law concerning fina ncial collateral arrangements5.  
                                                 
1  Draft law transposing Directive 2009/44/EC of the Euro pean Parliament and the C ouncil of 6 May 2009 amending 
Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on 
financial collateral arrangements as regards linked systems and credit claims. 
2  OJ L 189, 3.7.1998, p. 42. 
3  Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 am ending Directive 98/26/EC on 
settlement finality in payment and s ecurities settlement systems and Dir ective 2002/47/EC on financial collateral 
arrangements as regards linked systems a nd credit claims (OJ L 146, 10.6.2009, p. 37). The ECB commented on an early 
draft of Directive 2009/44/EC in Opinion CON/2008/37 of 7 August 2008 (OJ C 216, 23.8.2008, p. 1).  
4  The Law of 28 April 1999 transposing Directive 98/26/EC of 19 May 1998 on settlement finality in payment and 
securities settlement systems.  
5  The Law of 15 December 2004 on financial collatera l and on various tax provisions in relation to in rem  collateral 
arrangements and loans for financial in struments. The ECB commented on an early draft of this Law in Opinion 
CON/2004/27. All ECB opinions are available on the ECB’s website at www.europa.eu. 
ECB-PUBLIC 
2 1.2 In addition to transposing Directive 2009/44/EC, the draft law6 will set aside the rules providing for 
a simplified realisation of certain financial colla teral (i.e. pledges of cash and of banking claims)7 in 
the event of judicial reorganisation proceedings of the debtor. This exemption to the regime 
currently in force in Belgium8 will not apply where the default9 consists in the non execution of an 
obligation, i.e. where it is a ‘payment default’ . Under the amended regime all creditors will be 
prevented from invoking the rules on the simplified realisation of pledges of cash and of banking claims, as well as those ensuring the validity a nd enforceability of ‘netting arrangements’, in the 
event of judicial reorganisation proceedings concer ning a debtor who is not a ‘public or financial 
legal person’
10. In the event of judicial reorganisation pr oceedings concerning a public or financial 
legal person, creditors who are not public or financial legal persons will be prevented from 
invoking the abovementioned rules on realisation a nd netting arrangements. Similarly, where the 
King adopts an act disposing of property with re gard to an insurance undertaking, a credit 
institution or a settlement institution11, the creditors of such institution who are not public or 
financial legal persons will be prevented from invoking the abovementioned rules on realisation 
and netting arrangements. However, the draft law w ill not affect the rules governing the realisation 
of pledges of financial instruments in the Law of 15 December 2004.  
1.3 Furthermore, the provisions ensuring the va lidity and enforceability of netting arrangements, 
(including close-out netting clauses12) in case of insolvency, will be set aside where one of the 
parties is a non-merchant natural person13. This amendment in the draft law became necessary 
following a decision of the Belgian Constitutional Court, which held that these provisions breach 
                                                 
6  Article 14, 4° and 5° of the draft law, introduci ng Article 4 § 3 and § 4 in the Law of 15 December 2004. 
7  The simplified realisation procedure for pledges of banking claims provides that in case of default, the pledgee may 
realise the pledged banking claim without  the need for a prior notice or a Cour t authorisation and notwithstanding the 
existence of an insolvency procedure, an attachment, or an y other situation of concourse between the creditors of the 
debtor or of the third party who provided the collateral (Article 9(1) of the Law of 15 December 2004, introduced by Article 17 of the draft law). 
8  See ECB Opinion CON/2004/27, in particular paragraphs 4, 7 and 11. 
9 Under general Belgian law, the concept of ‘payment’ refers to the execution of  a counterparty’s ob ligations. Hence, a 
‘payment default’ covers all cases of non- execution of an obligation, including notab ly an obligation to deliver securities. 
10  The public or financial legal persons are: (a) credit inst itutions, (b) investment underta kings, (c) insurance firms, 
(d) management companies of collective investment undertakings, (e) undertakings for collective investments, (f) central 
counterparties, settlement agents and clearing houses, (g) fina ncial institutions, (h) Belgian or  foreign legal persons acting 
in their own name but on behalf of the beneficiaries of s ecurities, (i) public authorities except companies covered by a 
State guarantee, (k) the NBB, the ECB, the Bank for International Settlements, multilateral development banks, the 
International Monetary Fund, the Europ ean Investment Bank, (l) any other fore ign legal person which belongs in its 
home country to one of the categories refe rred to in Article 1(2)(a) to (d) of Di rective 2002/47/EC (Article 13, 4° of the 
draft law, introducing an Article 3,  11° in the Law of 14 December 2004).  
 The ‘financial institutions’ are undertakings that are not cred it institutions and whose princi pal activity consists in the 
acquisition of shares or which carry out one or more of th e activities for which credit institutions benefit from mutual 
recognition, e.g.: (a) mortgage companies, (b) consumer  credit companies, (c) leasing companies, (d) payment 
institutions or electroni c money institutions.  
11  i.e. the transfer, sale or contributions of such institutions ’ assets, liabilities or activities,  or of the securities or sha res they 
issue. These measures may be adopted by the King where the fact that such institution is not operated according to the 
applicable law presents a risk for financ ial stability. See ECB Opinion CON/2010/7. 
12  Articles 14 and 15 of the Law of 15 December 2004, respectively. 
13  Articles 19 and 20 of the draft law. 
ECB-PUBLIC 
3 the principles of non-discrimination and equal tr eatment enshrined in th e Belgian Constitution, 
insofar as they apply to non -commercial natural persons14.  
 2.  General observations 2.1 The ECB notes that when transposing Directive 2002/47/EC, the Belgian legislator had first opted 
for a broader scope than required by the Directive
15. The explanatory memorandum to the draft law 
underlines that the proposed amendment to this re gime seeks to balance, on the one hand, the 
protection of the collateral obtained by financial in stitutions and, on the other hand, the safeguard 
of the economic activity of non-financial compan ies when they encounter temporary difficulties16. 
The rationale of these amendments lies in the willingness to preserve some substance in the 
Belgian judicial reorganisation procedure for na tural or legal persons who are not public or 
financial legal persons in respect of transacti ons that do not concern financial instruments17.  
2.2 The ECB understands that the exemption intr oduced by the draft law does not prejudice the 
protection of settlement finality in payment a nd securities settlement systems (SSS) under the Law 
of 28 April 1999. Hence, when an entit y is a participant in such system18, its operations will 
continue to be covered by the settlement fina lity protection under the Law of 28 April 199919, 
regardless of whether that entity is a public or financial legal person within the meaning of the 
amended Law of 15 December 2004. 
 3.  Provisions relating to settlement finalit y in payment and securities settlement systems 
 Definition of institutions and participants 
The Belgian legislator had already availed, in previous legislation
20, of the possibility in the second 
subparagraph of Article 2(b) of Directive 98/ 26/EC of considering as ‘institutions’ certain 
undertakings participating in an SSS  that do not fall within the categories of institutions listed in the 
Directive21, provided that such assimilation is warranted on grounds of systemic risk and that at 
least three other participants in this SSS do fall within one of these categories. Under the draft 
law22, the NBB will determine the existence of systemic  risk grounds, in the context of its oversight 
                                                 
14  Explanatory memorandum, pages 1, 20 and 21. 
15  See ECB Opinion CON/2004/27, in particular paragraph 4.  
16  Explanatory memorandum, p. 14. 
17  Explanatory memorandum, p. 16, and the reference to the use by the French authorities of their opt out possibility. 
18  Also where a participant is assimilated to an institution for r easons of systemic risk (Article 3, 2° of the draft law). See 
paragraph 3. 
19  See also Article 6, 1° and 2° and Article 11 of the draft law. 
20  See the Royal Decree of 3 June 2007, inserting a last subpa ragraph in Article 2 §2 of the Law of 28 April 1999. The ECB 
commented on an early draft of this provision in Opinion CON/2006/34. 
21  The categories of institutions listed in Directive 98/26/EC ar e: credit institutions, investment firms, public authorities an d 
third country undertakings performing similar functions. 
22  Article 3, 2°, penultimate subparagraph of the draft law, in troducing a definition of ‘institution’ in the Law of 28 April 
1999. See also Article 4, 2° of the draft law, re placing Article 2 §2 of the Law of 28 April 1999. 
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4 competence23, and will establish and publish the criteria it uses. The NBB will also be competent to 
determine the existence of systemic risk warra nting considering an indirect participant as a 
participant24. The ECB notes that the requirement related to the existence of systemic risks grounds 
is now explicitly mentioned in the draft law25. For the remainder, all comments and 
recommendations made in ECB Opinion CON/2006/34 remain applicable to the draft law26. 
 
4. Provisions relating to financ ial collateral arrangements  
 The introduction of credit claims as eligible collateral in financial collateral arrangements 
4.1 The application of the Law of 15 December 2004 on financial collateral is extended to agreements 
creating a security over banking claims pledged or transferred by contract27. The draft law defines 
‘banking claims’ as pecuniary claims arising out of an agreement whereby a loan or a credit is 
granted by (i) a credit institution, (ii) a mortgage company, (iii) a consumer credit company, or (iv) any other foreign legal person which, in its  home country, belongs to one of the preceding 
categories
28. 
4.2 The ECB in general welcomes the proposed ame ndment, which will facilitate the use of credit 
claims as collateral for Eurosystem credit opera tions. The ECB notes that the Belgian definition of 
‘banking claims’ is wider than the definition of credit claims in Article 2 (5)(a)(ii) of Directive 2009/44/EC, which only covers credit claims granted by credit institutions defined in Article 4(1) 
of Directive 2006/48/EC
29, including the institutions listed in Article 2 of Directive 2006/48/EC. By 
contrast, the ‘banking claims’ in the draft law cover,  in addition, pecuniary claims arising out of an 
agreement whereby a loan or a credit is gran ted by a mortgage company or a consumer credit 
company. The ECB understands that this differen ce aims at avoiding any discriminatory treatment 
between these different categories of lending institutions30.  
The restriction on the realisation of pledges on credit claims and on the rules ensuring the 
enforceability and validity of netting arrangements 
4.3 As already mentioned, the draft law will set asi de (i) the rules providing for a simplified realisation 
of pledges on cash and of banking claims, and (ii) the rules ensu ring the enforceability and validity 
of netting arrangements, in the event of judicial re organisation proceedings of a debtor that is not a 
‘public or financial legal pers on’, unless there is a payment default. The ECB notes that by 
                                                 
23  Explanatory memorandum, p. 3. Where under the draft law, it  is the parties who trigger the assimilation, the NBB could 
nevertheless issue a recommendation to that en d in the context of its oversight tasks. 
24  Article 3, 6°, second subparagraph of the draft law, introduci ng a definition of ‘ participant’ in the Law of 28 April 1999.  
25  Article 3, 2°, penultimate indent of the draft law, introduc ing a definition of ‘institution’ in the Law of 28 April 1999. 
26  See CON/2006/34, in particular paragraph 2.1. 
27 Article 14, 2° of the draft law, introducing an Article 4 §1 3° in the Law of 15 December 2004. 
28  Article 13, 3° of the draft law, introducing an  Article 3, 10° in the Law of 15 December 2004.  
29  Directive 2006/48/EC of the European Parliament and of  the Council of 14 June 2006 relating to the taking up and 
pursuit of the business of credit institu tions (recast) (OJ L 177, 30.6.2006, p. 1) . 
30 Explanatory memorandum, p. 8. 
ECB-PUBLIC 
5 introducing this provision, the Belgian legislator, similarly to other Member States31, will use the 
exemption provided for in Article 1(3) of Dir ective 2002/47/EC, under which Member States may 
exclude arrangements where one of the parties is  a person other than a natural person, including 
unincorporated firms and partnershi ps, provided that the other party is an institution as defined in 
points (a) to (d), which includes a central bank and the ECB.  
This exemption might, in certain cases, be an obs tacle to the swift realisation of the collateral 
provided for Eurosystem credit operations. This mi ght notably be the case where the NBB accepts 
as collateral from a Eurosystem  counterparty, a credit claim32 which is a debt obligation of a non-
financial corporation33 that is not a ‘public or financ ial legal person’ and where both the 
Eurosystem counterparty and the non-financial corp oration default in their respective obligations. 
The ECB emphasises that in order to ensure that a valid security is created over credit claims, and 
that the credit claim can be swiftly realised in the event of a counterparty default, in general, there 
should be no restrictions regarding the realisation of the credit claim used as collateral. However, 
the ECB notes that the exemption provided by th e draft law does not seem to represent major risks 
for the Eurosystem, as: (i) the exemption does not apply in case of a payment default; and (ii) the 
probability is low that a double default would occur where all the specific conditions for the exemption to apply are fulfilled.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 29 April 2011. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
31  See the explanatory memorandum, p. 16. 
32  To be eligible as collateral for Eurosystem credit operations , a credit claim must be a debt obligation of a debtor vis-à-vis  
a Eurosystem counterparty; the eligible debtors are non-financia l corporations, public sector entities and international or 
supranational institutions (Section 6.2.2 of Annex I to Guideline ECB/2000/7of the ECB of 31 August 2000 on monetary 
policy instruments and procedures of the Eurosystem (OJ L 310, 11.12.2000, p. 1)). 
33  As defined in the ESA 95 (see Section 6.2.2 of Annex I to Guideline ECB/2000/7). Under Council Regulation (EC) 
No 2223/96 of 25 June 1996 on the European system of na tional and regional accounts in the Community (OJ L 310, 
30.11.1996, p. 1), the sector non-financia l corporations (S.11) consists of in stitutional units whose distributive and 
financial transactions are distinct from those of their owners and which are mark et producers …, whose principal activity 
is the production of goods a nd non-financial services.