Report from the Commission - Evaluation Report on the Settlement Finality Directive 98/26/EC (EU 25)
Date: 2005-12-15
Institutions: European Commission
Subjects: EU Member State, European Monetary System, banking, bond, intra-EU payment, monetary policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.4.2006 
COM(2005) 657 final/2 

CORRIGENDUM 
Ce document annule et remplace le point 3 section 3 du COM(2005)657 final du 15.12.2005 
Concerne toutes les versions excepté les versions HU et IT 

REPORT FROM THE COMMISSION 

Evaluation report on the Settlement Finality Directive 98/26/EC 
(EU 25) 

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REPORT FROM THE COMMISSION 

Evaluation report on the Settlement Finality Directive 98/26/EC 
(EU 25) 

TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

Objectives of the evaluation......................................................................................... 5 

Implementation of the Settlement Finality Directive................................................... 6 

Main problems detected and risks envisaged............................................................... 7 

Objectives, results and impact of the Settlement Finality SFD ................................... 9 

Conclusions ................................................................................................................ 11 

ANNEX.................................................................................................................................... 12 

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Summary 

The Settlement Finality Directive 1998/26/EC, in the following the SFD, entered into force on 
December 11th, 1999 for the EU 15 Member States and for the 10 new EU Member States on 
May  1st,  2004.  The  SFD  is  also  applied  by  the  EEA  states:  Norway,  Iceland  and 
Liechtenstein. According to Article 12 of the SFD, “---the Commission shall present a report 
to the European Parliament and the Council on the application of this Directive, accompanied 
with, where appropriate, proposals for its revision.” A report should have been presented to 
the European Parliament and the Council on December 11th, 2002 the latest.  

One such report was indeed commissioned by the Commission and drawn up concerning 
EU15. This report was finalised on February 19, 2003: 
http://europa.eu.int/comm/internal_market/payments/docs/transposition-dir-
9826/main_en.pdf). In view of the forthcoming enlargement, that report was not presented to 
the Council and the European Parliament. This evaluation report is intended to cover the 
whole of EU 25.  

To prepare the present report, the Commission asked Member States to reply to an extensive 
questionnaire  regarding  the  implementation  and  application  of  the  SFD.  24  Member  States 
have done so: Cyprus, which did not, has explained that there was not yet sufficient practical 
experience of the application of the SFD to reply to the questionnaire. 

The Settlement Finality Directive – Rationale and Description 

The  SFD  was  the  Community  legislator’s  response  to  the  concerns  identified  by  the 
Committee  on  Payment  and  Securities  Systems  (CPSS)  under  the  auspices  of  the  Bank  for 
International Settlements regarding systemic risk. With the start of stage II of the Economic 
and Monetary Union (EMU) in 1994, it became evident that there was a need for a stable and 
efficient payment infrastructure to assist cross-border payments, to  support the future single 
monetary  policy  and  to  minimise  systemic  risk  especially  in  view  of  the  increasing  cross-
border aspects.  

As a response to the need to minimise systemic risk and to ensure the stability of payment and 
securities settlement systems, the SFD provides that transfer orders entered into such systems 
cannot  be  revoked  or  otherwise  invalidated.  Such  protection  is  created  by  stipulating  the 
irrevocability  and  finality  of  transfer  orders  and  of  netting  of  transfer  orders  entered  into  a 
qualifying system, even in the event of insolvency proceedings against a domestic or foreign 
system  participant.  It  should  be  noted,  however,  that  such  protection  did  exist  in  many 
Member States, but in different forms, also before the introduction of the SFD.  

The  SFD  contains  14  articles  and  is  relatively  short.  This  brevity  is  counterbalanced  by  the 
high complexity of the text.  

The mechanism of the SFD is to establish a class of systems that benefit from its protection, 
being those that fall within its operational definition of a ‘system’ and that have accordingly 
been so designated by the competent MS authority and notified by them to the Commission. 
In  this  report,  ‘system’  is  used  to  refer  to  a  member  of  this  class.  Overall,  the  SFD  has 
established a pan-European class of systems, membership of which is said anecdotally to be 
of commercial, as well as systemic, value. The Commission maintains list of notified systems 
http://www.europa.eu.int/comm/internal_market/financial-markets/settlement/dir-98-26-
at 
art10-national_en.htm.  

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The  SFD  sets  out  its  scope  by  defining  several  core  components,  such  as  “system”, 
“participant”  and  “insolvency  proceedings”.  As  soon  as,  under  the  rules  of  a  system,  a 
payment  transfer  order  or  a  securities  settlement  order  has  been  entered  into  a  system,  it  is 
protected  against  third  party  claims,  even  in  the  event  of  a  bankruptcy  of  one  or  more 
participants  in  the  system.  This  protective  effect  occurs  if  a  transfer  order  has  been  entered 
into a system before opening of insolvency proceedings, or, on the same day after the opening 
of  such  proceedings,  provided  the  concerned  parties  can  prove  that  they  were  not  aware  or 
should  not  have  been  aware  of  those  proceedings.  Further  to  this  protection,  no  law, 
regulation, rule or practice on the setting aside of contracts and transactions concluded before 
the  opening  of  insolvency  proceedings  shall  lead  to  the  unwinding  of  a  netting  of  transfer 
orders.  The  crucial  moment  of  entry  of  a  transfer  order  is  determined  by  the  rules  of  each 
system.  Furthermore,  the  SFD  requires  the  disapplication  of  all  retroactive  effects  of 
insolvency proceedings on transfer orders or netting. 

If a decision is taken in a Member State to open insolvency proceedings against a participant 
in a system, this shall immediately be communicated to a central authority, appointed in each 
Member State, which then notifies the central authorities of all other Member States. This is 
to ensure that a rapid alarm can be given. 

The applicable law that governs a system is decided in each system’s rules. The SFD allows 
for  the  national  law  of  any  Member  State  to  govern  a  system,  as  long  as  one  of  the 
participants in the system has its head-office in that State where the law chosen is applicable.  

As for securities  provided as collateral to participants in connection with systems or central 
banks,  the  law  applicable  to  the  collateralisation  is  the  law  of  the  Member  State  where  the 
register, account or depository where they are legally recorded is located. 

Designation of Payment- and Securities Settlement Systems  

According  to  articles  6  and  10  of  the  SFD,  Member  States  must  notify  to  the  Commission 
which  systems  they  have  designated  and  which  national  authorities  are  in  charge  of 
notification,. The Commission holds two registers with this information, which are available 
on  the  internet.  They  are  up-dated  whenever  Member  States  send  new  information  to  the 
Commission.  

The 
information  concerning  which  authorities  Member  States  have  designated  for 
notifications of opening of insolvency proceedings (Article 6 of the SFD) contains the official 
name  of  the  authorities  in  charge  and  the  contact  details  (responsible  persons,  telephone 
numbers etc.). 11 Member States have designated their National Central Banks as responsible 
authorities  (At,  Bel,  Cyp,  Gr,  Hu,  Irl,  It,  Lt,  Mt,  Nl,  Pl);  7  others  have  designated  their 
Financial  Supervisory  Authorities  (Dk,  Ee,  Fr,  D,  Lv,  Lu,  S)  and  6  have  designated  both 
(Czech  Rep,  Pt,  Si,  Sp,  Sk,  Uk  (6  Member  States).  One  MS  has  designated  a  ministry  (Fi), 
(1 Member State) 
(http://www.europa.eu.int/comm/internal_market/financial-
markets/settlement/dir-98-26-art06-insolvency_en.htm) 

As to the designated payment and securities settlement systems (Article 10 of the SFD), there 
is  also  information  about  the  full  names  of  the  systems  and  contact  details.  Member  States 
notify this information to the Commission with a varying degree of detail. The Commission 
will  consider  making  the  details  Member  States  supply  uniform.  This  however,  should  not 
necessitate legislation, but rather an informal agreement with Member States.  

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There are a total of 107 systems designated and notified to the Commission. Of those, 49 are 
payment systems and 58 are securities settlement systems. There is a clear trend that more and 
more systems want to be designated by the relevant Member States as this provides a double 
benefit:  they  gain  the  SFD’s  “quality-label”,  and  its  trust-building  informal  “passport”  for 
doing  cross-border  business.  When  a  system  has  been  designated  and  notified,  market 
operators can rely on the legal quality of the providers of services and the legal framework in 
which  they  will  operate.  Foreign  courts  and  authorities  must  respect  the  protection  granted 
under the SFD to those systems.  

1. 

OBJECTIVES OF THE EVALUATION  

The main objectives of this evaluation report are: (i) to analyze the process by which the SFD 
has been implemented and (ii) to identify a list of potentially problematic issues that could be 
subject of a future revision of the Directive.  

The evaluation has been carried out on the basis of information collected from Member States 
and the European Central Bank. As for the first objective, Member States have responded to 
an  extensive  questionnaire  from  the  Commission  (see  section  1)  on  the  application  of  the 
SFD.  The  material  that  the  Commission  has  at  its  disposal  is  voluminous  and  cannot  be 
reproduced in detail. In consequence, where this evaluation is silent on an issue, there is seen 
to  be  no  problem  and  no  need  consider  any  revision.  The  interested  reader  may  however 
consult each Member State’s replies on the Commission Web-Page (address to be provided) 
for full details.  

As  for  the  second  object  given,  several  Member  States  and  the  ECB  have  expressed  an 
opinion  on  what  they  see  as  potentially  problematic  issues.  In  this  evaluation  report,  the 
Commission  has  identified  the  key  issues  to  be  further  analyzed  (section  4).  This  is  not  a 
formal  proposal  for  “the  revision  of  the  directive”,  in  the  terms  of  Art.12  of  the  SFD.  Any 
proposal for amendments  to the  directive would of course be accompanied  by a  full  impact 
assessment. 

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2. 

IMPLEMENTATION OF THE SETTLEMENT FINALITY DIRECTIVE 

Analysis of the process by which the SFD has been implemented. 

There seems to be consensus among Member States that the SFD provides a very important 
tool to ensure increased protection against systemic risk in European payment and securities 
settlement systems and that it provides and increases legal certainty and predictability among 
participants  from  different  Member  States.  The  SFD  is  seen  to  have  had  its  intended  effect 
and  to  work  well.  To  illustrate  this:  one  reply  to  the  questionnaire  states  “We  are  quite 
satisfied  with  the  SFD  which  offers  a  comprehensive  (almost  perfect)  legal  protection  for 
systems with international participation. The SFD does not require any fundamental changes. 
Yet, we could imagine some minor improvements“. 

Based  on  the  answers  to  the  questionnaire,  there  are  a  few  issues  concerning  the 
implementation  that  could  to  be  highlighted.  This  section  will  not  deal  with  problematic 
issues; this is dealt with under section 4. 

•  Article 1(a): Concerning the choice of law governing the rules of a system (any Member 
State  law)  -  if  there  are  systems  that  are  registered,  located  in  and/or  notified  by  one 
Member State that are governed by the laws of another Member State, all but one Member 
State replied in the negative to this question. To the reversed question, if Member States 
know  if  their  laws  are  used  by  a  system  that  is  registered,  located  and/or  notified  in/by 
another  Member  State,  two  Member  States  replied  in  the  positive.  These  replies  do  not 
allow  a  straightforward  conclusion.  However,  it  suggests  that  payment  and  securities 
settlement systems could still have a preference to operate in a domestic set-up, despite the 
intention to create an Internal Market also for these services. It implies that there are no, or 
very few, systems that are truly pan-European. 

•  Article 2 (c) (d) (e): There is uniform treatment of central counterparties, settlement agents 
and  clearing  houses,  in  that  all  Member  States  allow  such  entities  to  be  “participants” 
under the SFD. 

•  Article  2  (g):  Concerning  the  use  of  the  concept  of  “indirect  participants”,  the  picture  is 
more  divided.  On  the  question  whether  there  are  cases  where  “indirect  participants”  or 
other  undertakings  have  been  considered  as  “participant”,  9  Member  States  reply  in  the 
affirmative. The other Member States’ legal systems either do not recognise the concept or 
have  not  admitted  any  indirect  participants  yet,  even  though  it  is  considered  possible  in 
some cases. All Member States have chosen not to expand the circle of participants beyond 
what is foreseen in the SFD. 

•  Article  3:  The  SFD  minimises  systemic  risk  by  providing  irrevocability,  enforceability, 
and  that  they  should  be  binding  on  third  parties,  of  payment  orders  and  securities 
settlement orders that are entered into a system. Systemic risk reduction requires amongst 
other  things  the  possibility  to  act  in  a  timely  manner  should  there  be  an  insolvency  of  a 
participant in a system. In this context, it is important that market participants as well as 
courts and competent authorities have immediate and full access to information, decisions 
and rulings regarding insolvencies. In 18 Member States, such decisions are made public 
and  available  on  different  media  with  different  delays.  Some  Member  States  use  the 
internet  to  notify  immediately  about  insolvencies  whereas  other  Member  States  only 
publish  the  information  with  a  few  or  up  to  8  days  delay  in  a  national  “Gazette”  or 

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“Official Journal”. Some Member States make decisions public only after they have gained 
full legal force and some Member States leave the option to judges to order more extensive 
advertising  of  a  decision  in  local  and  national  newspapers  for  example.  Five  Member 
States do not make insolvency decisions public, even if they have an extensive reporting 
duty  in  place  where  Courts  must  immediately  notify  for  example  the  National  Central 
Bank, the government and the Company register  

•  Art 5: None of the 24 Member States that replied to the questionnaire has any legislation 
to define the “moment of entry” of a payment order or a securities settlement transfer; all 
Member States refer this to be decided by the agreed rules of each system, in line with the 
provisions of the SFD. This is to be welcomed as it means that no participant must fear that 
national legislation would override the systems’ arrangements on this point.  

•  On  the  general  question,  whether  Member  States  have  or  have  had  problems  with  the 
implementation  of  the  SFD,  all  replied  in  the  negative.  Very  few  Member  States  had  a 
delayed implementation, but this was said to be due to other factors than the content of the 
SFD itself.  

The Commission concludes that the SFD has been transposed in all Member States in a very 
satisfactory manner, except in the cases mentioned in section 4.  

3. 

MAIN PROBLEMS DETECTED AND RISKS ENVISAGED  

This section provides an overview of areas where problems with the correct transposition or 
application  of  the  SFD  are  perceived  on  the  basis  of  the  replies  and  suggestions  from  the 
Member States and the ECB. It identifies the key potentially problematic issues that could be 
subject of a future revision of the Directive.  

There is also a range of lesser, more technical issues, that will need to be fully examined in 
any  future  work  on  revising  the  SFD,  but  which  do  not  seem  at  this  stage  to  qualify  as 
headlines issues.  

1. 

2. 

3. 

Article 1(a) One issue which seems to be supported by some 7 Member States is the 
introduction  of  an  option  to  have  more  than  one  Member  State’s  law  govern  a 
particular system, or different parts of it.  

It  appears  that  6  (perhaps  7,  one  has  not  provided  a  clear  answer)  Member  States 
may not, explicitly, allow the free choice of which law should govern a system. This 
is, potentially, a problem that cannot be disregarded and might lead to infringement 
proceedings. 

Article 2(a) of the SFD should make it clear that an “arrangement” between system 
participants can be established either by contract or by legislation. 

The range of institutions defined in Article 2 (b) includes credit institutions. There is 
some  debate  as  to  whether  this  includes  electronic  money  institutions  (ELMIS),  as 
defined in Directive 2000/46/EC. For 13 Member States and the ECB it does; for 11, 
it  does  not.  The  ECB  is  concerned  about  this  and  has  suggested  that,  for  stability 
reasons,  ELMIS,  should  enjoy  the  same  protection  as  other  “credit  institutions”,  in 
particular with regard to the operation of the TARGET system. 

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4. 

The  definitions  in  Article  2  (f)  and  (g)  of  “participant”  and  “indirect  participant” 
have attracted some attention. 

First,  according  to  the  ECB;  there  is  no  consensus  across  the  Union  whether 
settlement  agents,  clearing  houses,  and  central  counterparties  fall  within  these 
definitions;  although  all  Member  States  uniformly  consider,  in  their  replies  to  the 
questionnaire, that such entities can also act as participants. 

Secondly, the protections afforded by the SFD do not extend to participants outside 
the  EU.  Some  10  Member  States  argue  that  some  sort  of  extension  should  be 
arranged  and  another  4  Member  States  are  cautiously  positive  to  this  idea. 
Specifically,  protection  is  sought,  in  the  light  of  integrating  financial  markets,  for 
participation  of  third  country  participants  in  EU  based  systems  and  of  EU 
participants in non-EU systems. This is already possible on a case-by-case bilateral 
basis,  but  such  arrangements  carry  a  not  negligible  risk  to  legal  foreseeability  and 
potentially to the systems as such. Obviously, there is no EU-competence to extend 
the validity of the SFD outside the territory of the Union, but it could be imagined 
that  participation  of  third  country  participants  or  systems  in  EU  based  systems  and 
EU participants participation in non-EU systems could be regulated in greater detail. 
Such arrangement could provide further financial stability.  

Article 2 (i) Some Member States would also like the SFD to clarify when a transfer 
order  should  be  considered  to  be  entered  into  a  system,  when  several  systems  are 
inter-connected. This is to ensure that the definition of “transfer order” or “payment 
order” covers all kinds of payment instruments.  

The  definition  of  “insolvency  proceedings”  in  Article  2  (j)  of  the  SFD  does  not 
clearly cover all types of national insolvency-like proceedings. Some Member States 
seek  further  expansion  of  the  definition  to  ring-fence  against  insolvency  incursion. 
Regulatory  moratoria,  for  example,  not  being  identical  to  insolvency  proceedings, 
may  not  be  covered,  although  “insolvency-like  proceedings”  of  that  type  can  have 
the  same  effects  on  payment  and  securities  settlement  systems  as  insolvency 
proceedings  proper.  One  suggestion  is  that  orders  should  be  protected  with  a  strict 
“24 hour rule” (transactions within this time will count as made before bankruptcy) 
without a “good faith” requirement. This problematic extends to Art 7 of the SFD to 
also include protection against so called cherry-picking (claw back rules) after other 
procedures than pure insolvency procedures.  

National definitions of “collateral security” Article 2 (m) do not seem to have caused 
compatibility problems although they differ quite substantially. The ECB has stated 
that although at present there is no immediate problem, difficulties may arise in view 
of the planned changes to the eligibility of collateral, which will include for instance 
bank loans. 

Article 3. A further problematic issue is that some 8 Member States do not foresee 
an  obligation  by  Courts  and  administrative  authorities  to  indicate  the  exact  time  of 
the  day  when  an  insolvency  decision  is  taken.  The  exact  time  when  insolvency 
decisions are taken is indicated in 15 Member States. Some of those Member States 
have  very  exact  requirements  that  oblige  judges  and  courts  to  indicate  hour  and 
minute  of  a  decision  and  others  also  publish  this  information  together  with  the 
decision  on  for  example  the  internet.  This  issue  may  have  less  importance  for 

5. 

6. 

7. 

8. 

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publicity  reasons  but  all  the  more  important  when  deciding  the  effects  of  an 
insolvency  decision  concerning  a  participant  in  system,  especially  considering  the 
amounts transferred in the systems and their irrevocability under Article 3.1.  

9. 

It is said that clarity as to the moment of entry into the system is also needed (See 
point  5)  under  Article  5  for  the  rules  of  some  RTGS  payment  systems,  and  in 
circumstances  where  several  systems  are  inter-connected  and  for  the  purpose  of 
Article 6(2) (insolvency notification). Article 6(2) foresees no to notify directly the 
ECB or the Commission. Considering their respective roles as overseer and system 
operator  and  as  holder  of  the  Community  register  of  systems,  such  an  obligation 
should  probably  be  introduced.  The  Commission  could  possibly  assume  a  rapid-
reaction  mechanism  to  ensure  that  information  about  a  possible  insolvency  is 
transmitted to all relevant parties immediately 

10. 

Article 8 applies the law of a system to “[…] the rights and obligations arising from, 
or in connection with, participation in that system”, in the insolvency of a participant. 
Clarity is  suggested  as  to a possible collision of insolvency laws, where the law of 
system is different from the law of the Member State where the system is located. 

4. 

OBJECTIVES, RESULTS AND IMPACT OF THE SETTLEMENT FINALITY SFD 

To summarise the findings from the information provided by Member States, a number of key 
questions should be answered. These main evaluation questions as to the effects of the SFD 
are: 

1. 

How have the different Member States transposed the SFD? 

As  outlined  above,  Member  States  have  transposed  the  SFD  in  a  very  satisfactory  manner. 
However,  there  are  some  problematic  issues  and,  concerning  a  few  Member  States,  the 
implementation  of  the  article  on  the  choice  of  law  for  systems,  which  may  lead  to  that  the 
Commission will consider infringement cases. 

2. 

How has new legislation been enforced? 

It appears that enforcement of the SFDs rules, through Member States laws, is efficient. The 
designation and supervision of systems seems to work without any particular problems. 

3. 

Have there been important delays?  

No, there were no important delays in the implementation of the SFD. All new Member States 
to the EU, as from May 1, 2004 state to have also implemented the SFD in a proper and well 
functioning way.  

4. 

Has legal clarity been achieved as to the consequences of an insolvency of a system 
participant? 

The SFD has, as intended, provided a two-fold legal clarity/certainty; in that each system can 
choose which Member State law it wants to apply and follow; and in that all Member States 
laws  have  made  payment  transfer  and  securities  settlement  orders  irrevocable,  binding  and 
effective once they are entered into a system (with the exceptions outlined in the SFD) and in 
accordance with the system’s rules. 

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5. 

Can  the  market  be  assured  that  payment  transfers  and  securities  settlement  orders 
cannot be revoked after entry into a “system”?  

Yes,  there  are  however  a  small  number  of  factors  that  should  be  considered,  such  as  the 
definition of “insolvency proceedings” in the SFD that may be insufficiently clear to cover all 
types  of  relevant  proceedings  that  could,  theoretically,  put  in  question  the  irrevocability, 
binding effect and enforceability. Furthermore, the moment of “entry” into a system could be 
difficult to establish where two or more systems, designated as single systems, in reality work 
together. 

6. 

Has the SFD reduced systemic risk to payment- and securities settlement systems and 
the financial markets as a whole?  

Systemic risk associated with legal issues cannot be quantified. It is therefore appropriate to 
rely  on  circumstantial  evidence  that  the  SFD  has  reduced  systemic  risk.  In  addition  to  the 
implications to this effect from the Member States’ replies, affirmation may be found in the 
views  of  central  banks  charged  with  responsibility  for  contributing  to  the  stability  of  the 
financial system. Thus,  the  ECB  has  said, “… investor protection and systemic stability are 
based  on  a  stable  legal  environment  that  supports  investors’  rights  and  the  integrity  of 
systems,  of  which  one  example  is  the  Settlement  Finality  SFD”  (2004).  And  the  Bank  of 
England has said, “ … Designation [of the type provided by the SFD] can promote financial 
stability  by  providing  protection  for  a  system's  default  rules  from  insolvency  laws  in  EEA 
countries in the event of default of a system member (Financial Stability Review, Dec 2002). 

7. 

Have there been any costs due to the implementation of the SFD? 

No costs are known to the Commission besides the obvious man-power used in the Member 
States  to  actually  transpose  the  SFD  and  administrate  record  of  systems  etc.  As  anecdotal 
evidence,  a  report  by  the  Austrian  Chamber  of  Commerce  (October  2005)  does  not  include 
the SFD among Directives considered costly for the banking sector.  

8. 

Have there been any unexpected results or effects of the SFD?  

No Member State has reported such problems. 

9. 

Is there any evidence of bankruptcy having impact on a system? 

Member  States  have  replied  with  different  degrees  of  precision  to  the  question  whether 
participants to payment and/or securities settlement systems have been involved in insolvency 
proceedings  (“bankruptcies”)  (since  the  entry  into  force  of  the  SFD).  Member  States  have 
reported that 12 bankruptcies have occurred since the SFD entered into force. However, the 
effective number might be much higher than this. The reported bankruptcies seem not to have 
done any systemic harm; neither to the system the insolvent participant was involved in, nor 
to financial stability, at any measurable level. 

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5. 

CONCLUSIONS 

The European Commission draws the following conclusions. 

1. 

2. 

3. 

The SFD is functioning well. Member States are overall satisfied with it. 

There is some need and space for clarifications, improvements, better definitions and 
possibly simplification, as specified above. 

As  a  consequence  of  the  above,  the  Commission  will  propose  to  revert  to  the 
Member  States  and  the  ECB  during  2006,  for  instance  in  the  framework  of  the 
European  Securities  Committee  (ESC)  to  start  a  dialogue  to  establish  how  far  the 
issues  identified  for  improvement,  and/or  other  issues,  should  be  subject  to 
amendments to the SFD.  

This  dialogue  should  take  into  account  that  in  the  area  of  payment  and  securities 
settlement systems, some important changes may be underway which could have an 
influence  on  the  SFD.  The  Commission  may  propose  legal  instruments  to  increase 
the efficiency and safety of clearing and settlement services during 2006. Moreover, 
the outcome of the discussion of the proposal for the Community to sign the Hague 
Securities Convention may also have to be taken into account. 

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ANNEX 

Logframe for the evaluation of Settlement Finality Directive 

Description 

Evaluation questions 

Evidences 

Indicators 

Assumptions 

•  The insolvency of a 

participant in a Clearing 
and Settlement system may 
have systemic implications. 

Actions 

Results  

Impacts 

•  Settlement Finality 

•  How have the different 

Directive. 

•  Ensure legal certainty, 
bindingness and 
enforceability of payment 
transfers- and securities 
settlement orders entered 
into a system as defined by 
the SFD. 

•  Reduction of systemic risk 

inherent in payment 
systems. 

•  Contribute to the cost-

effective operation of cross-
border payment and 
securities settlement 
arrangements in the EU. 

Member States transposed 
the SFD? 

•  How has new legislation 
been applied and/or 
enforced? 

•  Have there been important 
delays or shortcomings? 

•  Has legal certainty 

increased? 

•  Can the market rely on the 

bindingness and 
enforceability of payment 
transfers and securities 
settlement orders after entry 
into a “system”? 
Is there any implementation 
cost due to the SFD? 
•  Are other costs reduced? 
•  Are there any unexpected 

• 

• 

impacts? 
Is there any evidence of 
bankruptcy having impact 
on a system? 

•  Potential consequences of 
the failure of a participant 
in a system for the system 
as a whole or even to other 
systems as evidenced e.g. 
by the relevant studies of 
CPPS-IOSCO.  
•  National laws. 
•  System rules. 

•  Potential risk of unwinding 
and losses for participants 

•  Regulatory and capital 
adequacy treatment 

•  Transposition indicators. 
•  Transposition delays. 

•  National laws. 
• 
•  Responses to questionnaire 

Insolvency cases. 

Insolvency cases. 

• 
•  Contagion risk/effects due 
to insolvency cases. 

•  Responses to questionnaire. 
• 
Information provided by the 
Member States 

•  Treatment and impact of 
insolvency cases. [the 
number will stay 
unaffected, it’s the effects 
that count] 

•  Problems reported by 
Member States.  

•  Reduced impact of 
insolvency cases. 

•  Reduced risk of contagion 

cases. 

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