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 Finality in Payment Systems and Securities Settlement Systems Law of 2003 (CON/2005/28)
Date: 2005-08-10
Institutions: European Central Bank
Subjects: Cyprus, liquidation, national law, payment system

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 Finality 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 amending 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 based on the third and fifth indents of Article 2(1) 

of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank 
by national authorities regarding draft legislative provisions1 and Article 25.1 of the Statute of the 

European System of Central Banks and of the European Central Bank, as the draft law relates to: (i) 

the  CBC,  a  national  central  bank;  (ii)  payment  and  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  Rules  of  Procedure  of  the  European 

Central Bank, the Governing Council has adopted this opinion. 

3. 

The  ECB  notes  that  the  main  purpose  of  the  draft  law  is  to  address  a  number  of  discrepancies 

between  Directive  98/26/EC  of  the  European  Parliament  and  of  the  Council  of  19  May  1998  on 
settlement  finality  in payment  and  securities  settlement  systems2  (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 been identified and welcomes the action of the CBC to address them. 

4. 

Section  4  of  the  draft  law  provides  that,  in  the  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  liquidation  proceedings  within  the  scope  of  the 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
OJ L 166, 11.6.1998, p. 45. 

 
 
 
 
                                                      
SFL.  Moreover,  the  draft  law  provides  that,  following  the  adoption  of  a  voluntary  winding-up 

resolution,  the  participant  subject  to  liquidation  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  conjunction  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 the 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 authority 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  established  in  Cyprus  in  payment  and  securities  settlement  systems. 

The  Directive  represents  an  important  step  towards  providing  certainty  with  regard  to  the 

determination  of  the  applicable  law  and  to  the  insulation  from  insolvency  proceedings  of 

transactions  and  assets  provided  as  collateral  within  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 

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