CELEX: 51998PC0151
Language: en
Date: 1998-03-13
Title: Amended proposal for a European Parliament and Council Directive on settlement finality in payment and securities settlement systems

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                Brussels, 13.03.1998
                                               COM(1998) 151 final
                                               96/0126 (COD)
                   OPINION OF THE COMMISSION
            pursuant to Article 189 b (2) (d) of the EC Treaty,
                on the European Parliament's amendments
             to the Council's common position regarding the
                               proposal for a
        EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE
ON SETTLEMENT FINALITY IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS
         AMENDING THE PROPOSAL OF THE COMMISSION
              pursuant to Article 189 a (2) of the EC Treaty
 ---pagebreak---  ---pagebreak--- 1.  BACKGROUND
1. On 30 May 1996, the Commission adopted a proposal for a Directive on Settlement Finality and
    Collateral Security1. This text was forwarded to the Parliament, the Council, the Economic and
    Social Committee and the European Monetary Institute.
2. The Council 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 proposal2.
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 its opinion on the Commission
     proposal during its plenary meeting of 9 April 19973.
 6. On 4 July 1997, the Commission adopted its amended proposal4 in the light of the consultation of
     the European Parliament, the Economic and Social Committee and the European Monetary
     Institute.
 7. On 13 October 1997, the Council adopted its common position5.
 8. On 29 January 1998, the European Parliament adopted 3 amendments in second reading.
 In accordance with Article 189b (2) (d) of the EC Treaty, the Commission has to deliver an opinion
 on these amendments.
      COM (96) 193 final, OJ N° C 207, 18.07.1996., p. 13.
      OJ N°C 56, 24.02.97., p. 1.
      OJN°C 132,28.04.97.
      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'), COM/97/0345 final -
      COD 96/0126, Official journal NO. C 259 , 26/08/1997 p. 6.
      OJ C 375, 10 December 1997, p. 34.
 ---pagebreak--- 2.    POSITION TAKEN BY THE COMMISSION REPRESENTATIVE AT THE PLENARY SITTING
The European Parliament proposed 3 amendments to the text of the common position of the
Council. The Commission representative accepted all amendments.
(The relevant amendments are numbered 4 to 6; earlier amendments 1 to 3 were withdrawn)
3.    COMMISSION OPINION ON THE AMENDMENTS VOTED BY THE EUROPEAN PARLIAMENT
Amendment 4
Amendment 4 proposes to delete Article 11 of the common position. Since the first paragraph of
amendment 6 states in clearer terms what Article 11 aims at achieving, this amendment is
acceptable to the Commission.
Amendment 5
Amendment 5 changes the second part of article 3 (1) of the common position. It underlines the
exceptional nature of the cases in which transfer orders entered into the system after the opening
of insolvency proceedings are valid. It also turns around the burden of proof: transfer orders
entered after the opening of insolvency proceedings are only valid if the "system" can prove that it
was unaware and should not have been aware of this opening. Finally, it specifies whose
unawareness is relevant in order for a transfer order entered after the moment of opening of
 insolvency proceedings to be valid: transfer orders entered after that moment are only valid if the
 central counterparty, the clearinghouse or the settlement agent were unaware and should not have
 been aware of the opening of insolvency proceedings.
 Although the Commission is of the opinion that having to provide a negative proof (proof of
 unawareness) can raise difficulties, it nevertheless considers that this good faith clause is workable
 in practice, especially in view of the procedure for notifying insolvencies as defined in the
 Directive.
 Amendment 6
 •    first paragraph
 The first paragraph of amendment 6 clarifies what Article 11 of the common position aimed at
 achieving. The Commission can therefore accept both amendment 4 (deletion of article 11) and
 amendment 6 (1). It should be noted that the fact that Member States can impose supervision of
 systems can of course in no way prejudice the powers of the European System of Central Banks as
 laid down in Article 22 of its statute.
 •    second paragraph
 The second paragraph of amendment 6 aims essentially at allowing the final users of payment or
 securities settlement systems, namely the customer, to be informed of which system his bank or
 investment firms uses to transfer money or securities for his account, as well as of the main rules
 governing the functioning of these systems. This should allow the customer, and other parties with
 a legitimate interest, to be able to compare the services provided by different systems in terms of
 transfer time e.g. and to asses the degree of risk associated with one or other system. The higher
  level of transparency vis-à-vis this final user of a payment or securities transaction which is
  introduced by amendment 6 (2) can only be welcomed by the Commission.
 ---pagebreak---                          Amended proposal for a
        EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE
ON SETTLEMENT FINALITY IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS
                                                                    V
 ---pagebreak---         Common position of the Council                               Amendments by Parliament
                                             (Amendment 4)
                                                 Article 11
                    Article 11                              Deleted
In order to protect systems, each Member State
may impose more stringent conditions on
systems than those laid down by this Directive.
                                              (Amendment 5)
                                                Article 3(1)
 1. Transfer orders and netting shall be legally          1. Transfer orders and netting shall be legally
 enforceable and, even in the event of insolvency         enforceable and shall be binding on third parties,
 proceedings against a participant, shall be              even in the event of insolvency proceedings
 binding on third parties, provided that transfers        against a participant, provided that the transfer
 orders were entered into a system before the             orders were entered into a system before the
 moment of opening of such insolvency                     moment of opening of such insolvency
 proceedings as defined in Article 6(1) or if they        proceedings as defined in Article 6(1).
 were carried out on the day of opening of the
 insolvency proceedings unless the system was             Where, in exceptional cases, transfer orders enter
 aware or should have been aware of the opening           into a system after the moment of opening
 of such proceedings.                                     of insolvency proceedings and were settled on
                                                          the day of such opening, they shall only be
                                                          legally enforceable and binding on third parties
                                                          if the settlement agent, the central counterparty
                                                          or the clearing house can prove, after the
                                                          moment of settlement, that they were unaware
                                                          and should not have been aware of the opening
                                                          of the insolvency proceedings.
                                               (Amendment 6)
                                Article 10, second paragraph a and b (new)
                                                           In addition to the notification provided for in the
                                                           second paragraph above, Member States may
                                                           impose supervision or approval on systems
                                                           which fall under their jurisdiction.
                                                           Whoever has a legitimate interest may require
                                                           from an institution to be informed about the
                                                           system in which it participates and about the
                                                           main rules governing the functioning of such
                                                            systems.
                                                                                                           ^
 ---pagebreak---  ---pagebreak---                                                                   ISSN 0254-1475
                                                           COM(98) 151 final
                                             DOCUMENTS
EN                                                                09  10
                                    Catalogue number : CB-CO-98-155-EN-C
                                                             ISBN 92-78-31987-2
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