Opinion of the European Monetary Institute on a Consultation received from the Swedish Ministry of Finance under Article 109f(6) of the Treaty establishing the European Community and Article 5.3 of the Statute of the EMI on a Bill for new Swedish legislation concerning collateral when dealing in financial instruments and currencies (“Regeringens proposition 1996/97:42, Tilläggssäkerheter vid handel med finansiella instrument och valuta”) (CON/96/15)
Date: 1996-11-20
Institutions: European Monetary Institute
Subjects: Sweden, financial instrument, financial stability, national law, payment system

OPINION OF THE EUROPEAN MONETARY INSTITUTE

on a Consultation received from the Swedish Ministry of Finance under Article 109f(6) of the

Treaty establishing the European Community and Article 5.3 of the Statute of the EMI on a Bill

for new Swedish legislation concerning collateral when dealing in financial instruments and

currencies (“Regeringens proposition 1996/97:42, Tilläggssäkerheter vid handel med finansiella

instrument och valuta”).

CON/96/15

1.

The present consultation was initiated by a letter from the Swedish Ministry of Finance dated

22  October  1996,  enclosing  a  Government  Bill  for  new  Swedish  legislation  concerning

collateral provided in relation to dealings in financial instruments and currencies (“Regeringens

proposition 1996/97:42, Tilläggssäkerheter vid handel med finansiella instrument och valuta”)

(“the  Bill”).  The  Bill  includes  a  comprehensive  explanatory  description  of  the  proposed

legislative amendments and appendices containing inter alia a compilation of views expressed

by consulted parties. The Bill was presented by the Swedish Government to the Parliament on

10 October 1996.

2.

The main content of the Bill is that it will not be possible under normal circumstances to set

aside (“återvinna”) in accordance with Section 12, Chapter 4, of the Swedish Bankruptcy Act

(“konkurslagen”)  additional  security  (“tilläggssäkerhet”)  which  has  been  provided 

in

connection with trading of financial instruments or currencies.

3.

The EMI is competent to deliver an opinion on this consultation on the basis of Article 109f(6)

of the Treaty, Article 5.3 of the EMI Statute and Article 1.1, fourth and fifth indents, of Council

Decision 93/717/EC of 22 November 1993 since  the  Bill  contains  draft  legislative  provisions

applicable  to  additional  security  provided  for  cross-border  transactions  during  trading  in

financial  instruments  or  currencies,  including  security  provided  through  participation  in

clearing  operations  organised  by  a  central  bank  or  by  a  Swedish  or  foreign  clearing

organisation.

- 2 -

4.

The  Bill  states  that,  if  additional  security  is  provided  in  relation  to  trading  in  financial

instruments or currencies  effected  through  participation  in  clearing  operations  organised  by  a

central  bank  or  by  a  Swedish  or  foreign  clearing  organisation,  the  security  shall  be  protected

from  being  set  aside  under  Section  12,  Chapter  4,  of  the  Bankruptcy  Act  (“konkurslagen”),

provided that the security has been given in accordance with the agreed rules for the clearing

operations. The same shall apply if such additional security  is  provided  directly  between  two

parties  in  accordance  with  contractual  conditions  normally  applicable  to  trade  in  financial

instruments  or  currencies,  provided  the  security  has  been  given  in  accordance  with  the

agreement. However, additional security may be set aside if it has not been provided  without

delay  relative  to  a  shortfall  arising  in  the  relevant  security  arrangement  or  if  the  security  has

been provided under circumstances whereby the measure cannot be considered to be ordinary.

The Swedish Government proposes that provisions therefore are introduced in a new Section 2

of  Chapter  5  of  the  Financial  Instruments  Trading  Act  (“lagen  om  handel  med  finansiella

instrument” (1991:980) as reprinted).

5.

The EMI notes the discussion in the Bill as to the appropriate manner in which the legislative

amendment is to be effectuated. The EMI also notes the comments concerning the scope of the

new legal provisions, whereby the suggested legislative amendment as presently drafted would

cover and protect additional security provided not only when trading is taking place under the

auspices  of  clearing  organisations,  but  also  as  regards  security  provided  in  respect  of  OTC

trading.

6.

The  EMI  agrees  that  financial  markets  play  an  important  role  in  the  economy  and  welcomes

legislative  amendments  which  may  enhance  legal  certainty  which,  in  turn,  contributes  to  the

stability of financial institutions and markets. On the basis of the Bill, the EMI considers that

the  proposed  new  Section  2  of  Chapter  5  of  the  Financial  Instruments  Trading  Act  would

provide  greater  certainty  in  respect  of  collateral  and  security  arrangements  in  the  context  of

trading  with  financial  instruments  and  currencies  within,  inter  alia,  clearing  systems  and,

therefore, welcomes the proposed legal amendments.

7.

The EMI has no objection to this opinion being made public.

20 November 1996