Amended proposal for a European Parliament and Council Directive on settlement finality and collateral security (to be renamed 'On the limitation of systemic risk in payment and securities settlement systems')
Date: 1997-07-04
Institutions: European Commission
Subjects: credit institution, financial solvency, financial transaction, monetary policy, securities

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  04.07.1997 
COM(97)  345 final 

96/0126 (COD) 

Amended  proposal  for a 

EUROPEAN  PARLIAMENT  AND COUNCIL  DIRECTIVE 

ON  SETTLEMENT  FINALITY  AND COLLATERAL  SECURITY 
(TO  BE RENAMED:  "ON  THE LIMITATION  OF SYSTEMIC  RISK 

IN PAYMENT AND SECURITIES  SETTLEMENT  SYSTEMS") 

(presented  by the Commission  pursuant  to Article  189 a (2) 
of  the  EC-Treaty) 

!,  STAGE REACHED IN THE PROCEDURE 

1.  On  30  May  1996,  the  Commission  adopted  a  proposal  for  a  Directive  on  Settlement 

finality  and  Collateral  Security. 

2.  The  Council  forwarded  this  text  to  the  Parliament,  the  Economic  and  Social  Committee 
and  the  European  Monetary  Institute,  and  began  to  examine  the proposal  on  20  September 
1996. 

3.  The  Economic  and  Social  Committee  unanimously  adopted  an  opinion  on the  Commission 
proposal  on  31  October  1996,  in  which  it  recommended  that  securities  settlement  systems 
be included  in the  scope of the proposal. 

4  The  European Monetary  Institute  delivered  its opinion  on 21 November  1996. It  welcomed 
the  proposal  and  stressed  its  crucial  importance  to the  efficient  and  smooth  functioning  of 
payment  systems;  it  also  recommended  that  securities  settlement  systems  should  be 
included  in the  scope. 

5  The  European  Parliament  welcomed  this  proposal  and  adopted  the  legislative  resolution 
embodying  iîs  opinion  on  the  Commission  proposal  during  its  plenary  meeting  of  9  April 
1997. 

6  The  amended  proposal  which  is  attached  herewith  has  been  drafted  to  take  account  of  the 

outcome  of the consultation  of these  institutions. 

2. 

C O M M E N TS ON THE  AMENDMENTS 

The  European  Parliament  proposed  21  amendments to the text of the Commission  Proposal. 

1. 

Accepted  Amendments 

The  Commission  will  include  amendments  2, 3, 5, 7, 8, 9,  13, 14,  15,  18, 20 in  its 
amended  proposal. 

®  Amendments  2 and  3 add  a  recital.  These  recitals  are  useful  in  view  of  a  better 
understanding  of  the  background  against  which  this  proposal  was  made. 

Amendments  5. 7. 8. 9.  14 and  15  can  all  be accepted,  as they  aim  at  bringing 
securities  settlement  systems  within  the  scope  of  this  Directive.  This  inclusion 
is  in  line  with  the  recommendations  made  both  by  the  EMI  and  by  the 
ECOSOC. 

The  European  Parliament  wishes  securities  settlement  systems  to  be covered  by 
the  directive.  In  order  be  consistent  with  that  wish,  not  only  should  the  words 
"or  a  securities  settlement  system"  be  added  at  the  end  of  Amendment  7.  but 
"investment  firms  as  defined  in  point  2  of  Article  1  of  Directive  93/22/EEC 
excluding  the  institutions  set  out  in the  list  in Article  2(2)  points  a)-k)  thereof1 
should  also  be 
in  the  definition  of  "institution",  as  securities 
settlement  systems  typically  have  investment  firms  as  their  participants. 

included 

The  Directive  covers  collateral  security  provided  in  connection  with  monetary 
policy  operations.  Amendment  13  introduces  derivatives  within  the  definition 
of  monetary  policy  operations.  Inasfar  as  central  banks  carry  out  operations 
concerning  such  instruments, they  should  indeed  be  included  in this  Directive. 

in  the  European  Parliament's 
As  "securities  institutions"  are  not  defined 
amendments,  and  as the  definition  of "institution"  in the  Commission  amended 
proposal  also  covers  "investment  firms",  which  is  probably  what  the  European 
Parliament  means  by  "securities 
the 
Commission  amended  proposal  simply  refers  to  "institution"  instead  of  to 
"securities  institution".  It also replaces "participant" which  is defined  nowhere, 
with  "institution". 

in  Amendment 

institution" 

IS. 

Amendment  18 changes  the  wording  of  the  original  Commission  proposal,  but 
expresses  the same  idea and  seems therefore  acceptable. 

Amendment  20  clarifies  the  text  of  paragraph  1.  Paragraph  2  of  the  original 
Commission  proposal  explicitated  a  subhypothesis  covered  by  paragraph  1.  Its 
deletion  can  therefore  be  accepted. 

• 

Furthermore,  the  Commission  could  include  amendments  1,  4,  10  and  12 
subject  to minor  modifications. 

In  Amendment  1.  a  new  title  of  the  Directive  is  proposed:  "Proposal  for  a 
European  Parliament  and  Council  directive  on  the  treatment  of  payment 
systems  and  securities  settlement  systems 
insolvency 
proceedings  concerning  credit  or  securities  institutions".  Although  a change  in 
title  is  acceptable,  the  suggested  one  implies  that  the  Proposal  only  aims  at 
solving  problems  relating  to  insolvency.  Therefore,  a  new  title,  "Directive  on 
the  Limitation  of  Systemic  Risk 
in  Payment  and  Securities  Settlement 
Systems", shall be  included. 

in  the  context  of 

Amendment  4  is  acceptable,  except  for  the  mention  "and  the  Euro"  besides 
"Ecu".  Firstly, the separate mention  of "Euro" after  the words  "operating  in  any 
currency",  suggests the Euro  is not a currency.  Where  it is true that  the  Ecu  is a 
basket  and  not  a  currency,  this  is  not  true  for  the  Euro.  Secondly  and  more 
importantly,  the  fact  that  Ecu  and  Euro  are  mentioned  in  the  same  legal  text, 
suggests  that  the  Ecu  and  the  Euro  will  co-exist.  However,  the  Ecu  will  be 
replaced  by the Euro, so both will never exist at the  same time. 

Amendment  12  aims  at  including  securities  settlement  systems  within  the 
Directive.  It  amends  the  definition  of  "third  country  payment  system"  by 
deleting  the  word  "payment"  so  as  to  read  "third  country  system".  However, 
Parliament  seems  to  have  overlooked  that  the  definition  of  "third  country 
system"  onlr.  refers  to  "payment  systems"  without  mentioning  "securities 
seulement  systems",  which  is  inconsistent  with  the  Parliaments  concern  to 
include 
therefore 
completes  this  amendment  -in  its  amended  proposal-  in  order  to  include 
securities  settlement  systems. 

these  securities  settlement  systems. 

.  The  Commission 

Rejected  Amendments 

Amendments  6,  10,11,  16 and  21, and  especially  17 and  19 cannot  be  included  in 
tne  amended  proposal. 

Amendment  6(1)  describes  in  a  general  way  that  Member  States  will  have  to 
amend  their  insolvency  laws  in  accordance  with  this  Directive  in  order  to  avoid 
disruptions  in  the  case  of  insolvency  of  a  system  participant.  Amendment  6  (2) 
contains  the  obligation  for  systems  to  deposit  the  system  agreement  with  the 
authorities  responsible  for  supervising  the  institutions  which  participate  in  the 
system.  Amendment  6  (3)  provides  for  the  publication  of  a  notice  that  an 
agreement  has  been  deposited,  that  it  is  open  for  inspection;  it  must  also  indicate 
the  participating  institutions. 

AUiicugh  the  idea  of  a  notification  procedure  expressed  in  this  amendment  is  in 
line  with  the  current  approach  taken  by  the  Council, the proposed  procedure  seems 
unnecessarily  cumbersome  and  bureaucratic.  Moreover,  in  a  number  of  Member 
States,  the  authority  responsible  for  supervising  institutions  participating  in  a 
system  is  different  from  the  authority  which  supervises  the  system,  so  that  the 
authority  at  which  the  system  agreement  should  be  deposited,  should  be  better 
identified.  Therefore,  this amendment  cannot  be included  in the amended  proposal. 

In  Amendment  10. an  addition  is made  to the definition  of "payment  system".  The 
meaning of that  addition  needs  clarifying.  It can therefore  not be  accepted. 

Parliament,  in  its  Amendment  11  , changes  the  criterion  of  location  (to  determine 
whether  a  system  is  an  EU  system  covered  by  the  Directive)  from  the  choice  of 
lav/  made  by  the  system  participants  (system  located  in  the  Member  State  the  law 
of  which  the  system  participants  have  chosen  to  govern  their  agreement)  to  the 
place  of  settlement  or  book  entry.  Since  the  place  of  settlement  can  be  different 
from  the  place  where  the  correspondent  book  entry  takes  place,  this  amendment 
does  not  seem  consistent.  Moreover,  several  book  entries  can  be  made  for  one 
same  transfer  order  (e.g.  at  the  clearing  house  and  at  the  settlement  agent),  so  that 
it  would  be  necessary  to  define  which  book  entry  is  meant.  This  amendment  can 
therefore  not  be  taken  up  in the  Commission  amended  proposal.  However,  the  text 
of the  article  in the  original  Commission  proposal  has  been  altered  in order to  take 
into  account  the  inclusion  of  securities  settlement  systems  into  the  scope  of  this 
Parliament. 
by 
Directive, 

requested 

European 

the 

as 

Article  3  states  that  netting  of  transfer  orders  is  enforceable  if  entered  into  the 
system  before  the  opening  of  insolvency  proceedings.  The  Commission  proposal 
stated  that  the moment  of entry  into  the  system  was  to  be determined  in the  system 
agreement.  Amendment  16  (1)  deletes  that  statement.  The  question  then  arises 
when  a transfer  order  can  be  considered  to  have  entered  a system.  Parliament  does 
not provide  an answer  to that question  anywhere,  so  that this  amendment  cannot  be 
included  in  the  Commission's  amended  proposal.  However,  the  text  of  the  article 
in the  original  Commission  proposal  has been  altered  in order to take  into  account 
the  inclusion  of  securities  settlement  systems  into  the  scope  of  this  Directive,  as 
requested  by the European  Parliament. 

Article  3(2)  refers  to  rules  on  the  setting  aside  of  fraudulent  contracts  which  have 
been  concludedbefore 
the opening  of  insolvency  proceedings.  The  wording  in  the 
Commission  proposal  "to  enter  into  a  contract"  is  synonymous  of  "to  conclude  a 
contract".  It  does  not  refer  to  the  entering  cf  transfer  orders  into  the  system,  as 
Parliament's  amendment  16(2) stipulates.  Moreover,  it is unclear  what  is  meant  by 
unwinding  of "settlement  or  securities  transactions" referred  to  in the  Parliament's 
amendment.  This  wording  seems  to  imply  that  it should  not  be possible  to  unwind 
payments  or  securities  transactions  once  they  are  settled.  However,  the  Directive 
aims  at  protecting  transfer  orders  against  unwinding  while  they  are  within  the 
system,  which  is  when  systemic  risk  can  occur.  After  settlement,  no  problem  of 
systemic  risk  exists  any  more.  Therefore,  Amendment  16  cannot  be  included  in 
the  Commission's  amended  proposal. 

Amendment  21. which  replaces  the  previous  amendment  16  (3).  determines  the 
moment  of  opening  of  insolvency  proceedings,  which  are  deemed  to  be  the 
moment  when 
supervising 
authorities,  after  which  these  have  to  notify 
the  system  participants.  This 
procedure  has  been  examined  in  depth  in  the  past  (Commission  Working  Group) 
and  has  not been  retained  for  reasons of excessive  heaviness  of the  procedure. 

the  competent  authority  notifies 

the  national 

While  the  Commission  proposal  contains  a  prohibition  to  revoke  a  transfer  order 
after  the  moment  defined  by  the  rules of the  system,  Parliament's  Amendment  17 
prohibits  revocation  after  the  moment  when  insolvency  proceedings  are  opened. 
While  the  aim  of  this  provision  in  the  Commission's  proposal  was  to  protect  a 
transfer  when  it  went  through  the  system,  which  is  the  situation  where  systemic 
risk  can  occur,  the  provision  has  a  completely  different  meaning 
the 
Parliament's  Amendment.  It  does  not  seem  necessary,  to  repeat  -as  it  is  done  in 
Parliament's  Amendment-  that  in  case  of  insolvency,  a  participants'  assets  aie 
frozen  and that therefore  revocation  is not possible.  Moreover,  in Amendment  17. 
the  reference  to  the  third  party  (in  particular  the  client),  which  was  mentioned  in 
the  Commission  proposal,  has  been  deleted.  The  deletion  of  the  reference  to  the 
third  party  (e.g.  the  client,  originator  of  a  transfer  order),  could  mean  that  -in  a 
cross-border  system-  an  institution  could  be  prohibited  from  revoking  its  client's 
transfer  order  once  it  has  entered  into  a  system  (under  the  system  agreement  or 
under  the  other  Member  States'  law),  whereas  the  client  could  validly  revoke  that 
transfer  order  as  against  its  institution  (under  the  own  Member  State's  law),  \i  is 
clear  that  if this  were  to happen  with  a significantly  large amount,  it could  trigger 
systemic  risk.  Therefore  the reference  to third  parties  should  be  maintained. 

in 

This  amendment  can  therefore  not  be  taken  up  in  the  Commission  amended 
proposal.  However,  the  text  of the  article  in the  original  Commission  proposal  has 
been  altered  in  order  to  take  into  account  the  inclusion  of  securities  settlement 
systems  into the scope  of this Directive, as requested  by  the European  Parliament. 

Amendment  19 aims  at  deleting  Article  6  on  the  applicable  insolvency  law  in  the 
event  of a participant's  insolvency.  The  deletion  of this  article runs counter  the  aim 
of this  Directive  which  is to  avoid  systemic  risk,  and  this  for  two  reasons:  a)  legal 
certainty  and  b) avoidance  of conflicts  of law. 

a)  Legal  certainty:  In the event  insolvency  of a system  participant,  it is essential  to 
guarantee  legal  certainty  as  to  the  status  of  funds  or  securities  in  the  system. 
The  longer  there  is  uncertainty,  the  longer  these  funds  or  securities  will  be 
unavailable  for  the other participants  in the  system.  This  can  erode  the  liquidity 
base  of  these  participants  and  hence  lead  to  systemic  risk.  In  order  to  achieve 
legal  certainty,  it  is  vital  to  know  which  insolvency  law  applies  in  the  event  of 
the  insolvency  of a system  participant. 

b)  Avoidance  of  conflicts  of  law:  It  is  possible  that  the  insolvency  law  of  one 
Member  State  conflicts  with  the  contract  law  of  another  Member  State  (as  far 
as  the  exam  of  the  validity  of  the  claim  is  concerned).  Therefore  it  is  essential 
that  the  insolvency  of  a  system  participant  be  governed  by  the  insolvency  law 
of the Member  State whose  contract  law  governs the system  agreement. 

This  amendment  can  therefore  not  be  taken  up  in  the  Commission  amended 
proposal.  However,  the text  of the  article  in the  original  Commission  proposal  has 
been  altered  in  order  to  take  into  account  the  inclusion  of  securities  settlement 
systems  into the  scope  of this  Directive,  as requested  by the European  Parliament. 

AMENDED  PROPOSAL  FOR  A  EUROPEAN  P A R L I A M E NT  AND  C O U N C IL 

D I R E C T I VE  ON  THE  LIMITATION  OF  SYSTEMIC  R I SK  IN  P A Y M E NT  AND  S E C U R I T I ES 

S E T T L E M E NT  SYSTEMS 

Original  Commission  Proposal 

Amended  Commission  Proposal 

(Amendment  1) 
Title 

Proposal  for  a  European  Parliament  and  Council  Proposal 
Directive  on  settlement  finality  and  collateral  Council  Directive  on 
security 

for  a  European  Parliament  and 
the  Limitation  of 
in  Payment  and  Securities 

Systemic  Risk 
Settlement  Systems 

\ 

(Amendment  2) 
Recital  1 

Whereas  laws  on  the  bankruptcy  of  credit  and 
securities 
institutions  have  not  yet  been 
harmonised;  whereas  a proposal  dating  back  to 

credit  institutions  (OJ  C  356.  31.12.1985.  p.  55 
et  seq.  amended  on  8  February  1988)  is  still 
the 
the  Council:  whereas 
pending  before 
the 
agEeemfinl..pf..23  November  1995  of 
Member  States  meeting  within 
the  Council 
concerning  insolvency  proceedings  explicitly 
credit 
undertakings. 
e x ç i u fe 
institutions  and  investment  companies: 

insurance 

(Amendment  3) 
Recitai  7a 

Basle 

1990.  makes 

Whereas  the  "Report  of  the  committee  on 
interbank  netting  schemes  of the  Central  Banks 
of the  Group  of Ten  countries" by  the  Bank  for 
of 
International  ..Settlements  m 
November 
following 
recommendations,  inter  alia:  "Netting  schemes 
should,  have  a  well-founded  legal  basis  under 
all  relevant  jurisdictions  and  netting  scheme 
participants  should  have  a  clear  understanding 
of  the  impact  of  the  particular  scheme  on  each 
of  the  financial  risks  affected  by  the  netting 
process": 

the 

Amendment 4 
Article  1(1) 

The provisions of this directive shall apply to: 

The provisions of this directive shall apply to: 

( 1 ) any  Community  payment  system  operating  in 
any  currency  and  the  ECU  and  to  collateral 
security  provided  in connection  with  participation 
in such a system. 

(1)  any  Community  payment  system  or 
securities  settlement  system  operating  in  any 
currency,  the  ECU  or  in  various  currencies 
which the  system  converts  one  against  another 
and 
in 
connection with participation in such a system. 

security  provided 

collateral 

to 

Amendment  5 
Article 1(2) 

(2)  any  Community  institution  which  participates 
directly  in a third  country  payment  system  and  to 
collateral  security  provided  in  connection  with 
participation  in such a system. 

any  Community 

(2) 
institution  which 
participates directly  in a third  country  payment 
system  or  securities  settlement  system  and  to 
collateral  security  provided  in connection  with 
participation  in such a system. 

(Amendment 6) 
Article  la 

Rejected 

(Amendment 7) 
Article 2a 

(a)  "institution " means any undertaking as defined 
in  Article  1  of  Council  Directive  77/780/EEC 
including  the  institutions  set  out  in  the  list  in 
Article  2(2)  thereof,  which  participates  directly  in 
a  payment  system,  and  any  other  undertaking 
which participates directly in a payment system. 

(a)  "institution"  means  any  undertaking  as 
defined 
in  Article  1  of  Council  Directive 
77/780/EEC  including  the  institutions  set  oui 
in  the  list  in  Article  2(2)  thereof,  or  any 
investment firm as defined  in point 2 of Article 
1  of  Directive  93/22/EEC  excluding 
the 
institutions  set  out  in  the  list  in  Article  2(2) 
points aVk) thereof,  which participates directly 
in a payment  system  or  a securities  settlement 
system,  and  any  other  undertaking  which 
participates  directly 
in  a  payment  or  a 
securities settlement system 

(Amendment 8) 
Article 2b 

t 

(b)  "direct " participation  means  participation  in a 
payment 
for 
settlement. 

system  entailing 

responsibility 

(b)  "direct"  participation  means  participation 
in  a  payment  system  or  a  securities  settlement 
system entailing responsibility for  settlement. 

(Amendment 9) 
Article 2e 

(e)  "payment  order"  means  any  instruction  to 
place at the disposal of a final  recipient an amount 
of  money  by  means  of  a  book  entry  on  the 
accounts of a credit institution or a central bank; 

(e)  "payment order"  means  any  instruction  to 
place  at  the  disposal  of  a  final  recipient  an 
amount of money by means of a book  entry on 
the  accounts  of  a credit  institution  or  a  central 
bankr  and  in  the  case  of  securities  settlement 
systems,  an  instruction  to  an  institution  to 
transfer  the  claim  to  one  or  more  securities by 
means  of  a  book  entry  in  a  register  or  in 
another  form: 

(Amendment 10) 
Article 2h 

(h) 
"payment  system "  means  any  written 
agreement  between  two  or  more  institutions  for 
executing payment orders; 

(h) Unchanged 

(Amendment 11) 
Article 2i 

"Community  payment  system"  means  a 
(i) 
payment  system  located  in  a  Member  State.  A 
payment  system  shall  be  deemed  to  be  located  in 
the  Member  State  the  law  of  which  has  been 
chosen  by 
institutions  which  participate 
directly  in that  payment  system. In the absence of 
choice, the payment  system  shall be deemed to be 
located  in the  Member  State where the  settlement 
takes place; 

the 

or 

"Community  payment 

securities 
(i) 
settlement system " means a payment  system  or 
a  securities  settlement  system  located  in  a 
Member  State.  A  Community  payment  or 
securities settlement  system shall be deemed to 
be  located  in  the  Member  State  the  law  of 
which  has  been  chosen  by  the  institutions 
which-participate directly in that system. In the 
absence of choice, the  Community' payment ox 
securities  settlement  system  shall  be deemed to 
be  located  in  the  Member  State  where  the 
settlement takes place; 

(Amendment 12) 
Article 2j 

(j)  "third  country  payment  system"  means  any 
payment  system  which 
is  not  a  Community 
payment system. 

(j)  "third country system " means any  payment 
or  securities  settlement  system  which  is  not  a 
Community  payment  or  securities  settlement 
system. 

(Amendment 13) 
Article 2k 

(k) "monetary policy operation" means an outright 
(spot and forward)  buying and selling operation in 
the financial  markets or such an operation under a 
repurchase  agreement,  or  lending or borrowing of 
claims  and  marketable  instruments,  whether  in 
Community or in non-Community  currencies or in 
precious metals, by a Member  State Central  Bank 
or  by  the  future  European  Central  Bank;  it  also 
means  the  conduct  of  credit  operations,  by  a 
Member  State  Central  Bank  or  by  the  future 
European  Central  Bank, with credit  institutions or 
other  market  participants,  with  lending  being 
based on adequate collateral; 

(k)  "monetary policy  operation"  means  an 
outright  (spot  and  forward)  buying  and  selling 
operation  in  the  financial  markets  or  such  an 
operation  under  a  repurchase  agreement,  or 
lending or borrowing of claims and marketable 
instruments, or derivatives from  such claims or 
instruments, whether  in Community  or in non-
Community  currencies  or  in  precious  metals, 
by  a  Member  State  Central  Bank  or  by  the 
future  European  Central  Bank;  it  also  means 
the conduct  of credit operations, by  a Member 
State  Central  Bank  or  by  the  future  European 
Central  Bank,  with  credit  institutions  or  other 
market  participants,  with  lending  being  based 
on adequate collateral; 

(Amendment 14) 
Article 21 

(1) "collateral security" means all assets, provided 
for  the  purpose  of  securing  rights and  obligations 
in  a  payment  system  or 
potentially  arising 
provided  to Member State Central Banks or to the 
future  European  Central  Bank  in  connection  with 
monetary policy operations. 

(1)  "collateral  security"  means  all  assets. 
provided for the purpose of securing rights and 
obligations  potentially  arising  in  a  payment 
system  or  a  securities  settlement  system  or 
provided to Member  State Central  Banks or to 
the 
in 
future  European  Central  Bank 
connection with monetary policy operations. 

(Amendment 15) 
Article 2(la) 

(lal  "securities settlement system"  means  a 
written  agreement  between  institutions  with 
rules  for  the  transmission  and  execution  ol 
these 
securities 
institutions. 

transactions 

between 

(Amendments 16 and 21) 
Article 3 

(1)  Payment  netting  is  legally  enforceable  and 
shall, even in the event of insolvency  proceedings 
against  any  institution  which  participates  directly 
in  a payment  system,  be  binding  on third parties, 
provided  that  the  payment  order  was entered  into 
the  payment  system  before 
the  opening  of 
insolvency  proceedings.  The  moment  of  entrance 
shall  be  defined  by  the  rules  of  that  payment 
system. 

(1)  Netting  is  legally  enforceable  and  shall, 
even  in  the  event  of  insolvency  proceedings 
against  any 
institution  which  participates 
directly  in  a  payment  or  securities  settlement 
system,  be  binding  on  third  parties,  provided 
that the order was entered  into the  payment  or 
securities settlement system before  the opening 
of  insolvency  proceedings.  The  moment  of 
entrance  shall  be  defined  by  the  rules  of  that 
payment or securities settlement system. 

(2) Any  rule  on the  setting  aside of contracts  and  (2) Unchanged 
transactions  entered  into  before  the  opening  of 
insolvency  proceedings,  shall  not  lead  to  the 
unwinding of the netting. 

(2a) Rejected 

(Amendment 17) 
Article 4 

(1) A payment order may not be revoked either by 
an  institution  which  participates  directly  in  a 
payment  system  or  a  third  party  as  against  the 
other  direct  participants  in  that  payment  system 
after  the  moment  defined  by  the  rules  of  that 
payment system. This rule applies notwithstanding 
the opening of insolvency proceedings. 

(1) A payment order or an order for a securities 
transaction  may  not  be  revoked  either  by  an 
institution,  which  participates  directly  in  a 
payment  or  a  securities  settlement  system,  or 
by a third party as against the other  institutions 
directly  participating  in  that  system  after  the 
moment  defined  by  the  rules  of  that  system. 
This  rule  applies  notwithstanding  the  opening 
of insolvency proceedings. 

10 

(Amendment  13) 
Article  5 

the 

have 
Insolvency 
insolvency  proceedings  shall  not  have  retroactive 
retroactive  effects  on  the  rights  and  obligations 
effects  on 
rights  and  obligations  of  an 
in  connection  with  direct 
institution  in  connection  with  direct  participation  of  an 
in  a  Community  payment  or 
in  a  Community  payment  system.  Any  other  rule  participation 
or  practice  which  has  a  retroactive  effect  shall  be  securities  settlement  system.  Rules  which  have 
apply 
to 
.superseded. 
insolvency 

effect 
involved 

proceedings 

retroactive 

shall  not 

institution 

shall 

not 

in 

a 
institutions 
proceedings-

(Amendment  19) 
Article  6 

In  the  event  of  insolvency  proceedings  against  an 
institution  which  participates  directly  in a  payment 
system,  the  rights  and  obligations  arising  from  or 
in  that 
in  connection  with  direct  participation 
the 
payment  system,  shall  be  determined  by 
insolvency  law  of  the  country  where  the  payment 
system  is  located. 

In  the  event  of  insolvency  proceedings  against 
an  institution  which  participates  directly  in  a 
payment  system  or  a  securities  settlement 
system,  the  rights  and  obligations  arising  from 
or  in  connection  with  direct  participation  in 
that  system,  shall  be  determined  by 
the 
insolvency  law of the country  where the  system 
is located. 

11 

(Amendment 20) 
Article 7 

lie  rights  of  a  pledgee  in  connection  with 
participant  to  one  or  more  other 
in  a  payment  system  QL the  rights  of 
monetary  authorities  to  whom  collateral  security 
has  been  pledged  in  connection  with  monetary 
policy  operations,  shall  not  be  affected  by  the 
opening  of  insolvency  proceedings  against  the 
pledger.  The  collateral  security  shall  be  realised 
for  the  satisfaction  of  rights  in  connection  with 
participation 
in  a  payment  system  or  with 
monetary  policy  operations  with  priority  over  all 
other creditors. 

an  institution  or  of  a  settlement  agent  to 
collateral  security  provided  to  it  in  connection 
with the system and 

monetary  authorities  of  the  EC  to  collateral 
security  provided  to  them  in  connection  with 
monetary policy operations 

shall not be affected  by insolvency  proceedings 
the 
against  the  institution  which  provided 
collateral security. Such collateral security may 
be realised for the satisfaction of these rights. 

F 

in  a  Member  State 

third-country 
security 

institution  constitutes 
Where  a 
collateral 
in 
connection  with  participation  in  a  Community 
payment  system  or  in  connection  with  monetary 
policy  operations,  the  rights  of  the  pledgee  shall 
not  be  affected  by  the  opening  of  insolvency 
proceedings against that third-country  institution. 

Articles 8 to 10 

Unchanged. 

12 

ISSN 0254-1475 

COM(97) 345  final 

DOCUMENTS 

EN 

09  10  08 

Catalogue  number  :  CB-CO-97-335-EN-C 

ISBN 92-78-21938-X 

Office  for  Official  Publications  of the  European  Communities 

L-2985  Luxembourg