Selected legal acts


A single market for financial services has been under construction in the European Union since 1973. The introduction of the euro marked an important step on the road to a fully integrated single market for financial services in the EU. It is essential to remove not only technical, but also legal barriers in order to develop and ensure the provision of efficient payment and securities services, fair competition and an appropriate level of protection for the users.

Sound legal framework

The safety of any market infrastructure depends on the soundness of the legal framework on which it is built. Only a modern and efficient legal framework is capable of guaranteeing the legal soundness, safety and efficiency of payments, securities transactions and financial collateral arrangements, ensuring that legal certainty exists for all parties involved in the process.

Regulations & directives

The main legally binding instruments used by the Council and the European Parliament as the European Union’s legislator are regulations and directives. Regulations are directly applicable throughout the EU without any further action or involvement on the part of national parliaments. Directives must be implemented at the national level and therefore transposed into national legislation and approved by the respective national parliaments. These legislative instruments are used to harmonise existing rules at the EU level or to establish new legislation where national rules do not exist but are deemed necessary.

Settlement finality

Directive 98/26/EC of 19 May 1998, as amended by Directive 2009/44/EC of 6 May 2009, on settlement finality in payment and securities settlement systems (the Settlement Finality Directive; SFD) has harmonised the laws of the Member States to ensure the smooth operation of payment and settlement systems, also in case of bankruptcy of a participant, during day and night-time settlement.

The SFD stipulates that netting and transfer orders which are entered into a system prior to the opening of insolvency proceedings against a participant in that system are binding and enforceable against third parties. Collateral in favour of other participants and central banks can be realised in accordance with the terms of the relevant agreement, notwithstanding the opening of insolvency proceedings against the collateral provider.

Rights and obligations of participants in connection with the system are subject to the law governing that system. Rights to collateral securities recorded in an account, registry or central securities depository are governed by the law of the Member State where this account, registry or central depository is located. Interoperable systems are required to coordinate their rules for the moment of entry into a system and irrevocability.

The main achievements of the SFD are:

  • the elimination of the main risks incurred in payment and settlement systems;
  • the smooth functioning of a system even after the application of a foreign insolvency law; and
  • the legal certainty for collateral enforcement (also to the benefit of ESCB credit operations).

EU directives on settlement finality

Financial collateral

The Financial Collateral Directive 2002/47/EC of 6 June 2002, as amended by Directive 2009/44/EC of 6 May 2009, has harmonised the laws regarding the provision and enforcement of collateral in the Union. The Directive applies to public sector bodies, central banks and international financial institutions, supervised financial institutions, central counterparties, settlement agents and clearing houses with regard to collateral in the form of financial instruments, credit claims and cash.

The Directive abolishes all formalities for the creation and perfection of collateral. If an enforcement event occurs, the realisation of the financial collateral will be by sale or appropriation (if agreed) of the financial instruments and by setting off the amount or applying it in discharge of the relevant financial obligation. The Directive recognises close-out netting and set-off rights and applies the law of the place where the relevant account is maintained to all collateral in the form of book-entry securities.

The main achievements of the Financial Collateral Directive are:

  • the protection, validity and enforceability of credit claims and collateral agreements, which are to be executed in accordance with their terms, also in the event of the opening of insolvency proceedings against a counterparty;
  • the limitation of administrative burdens, formalities and cumbersome procedures;
  • the creation of a clear legal framework

EU directives on financial collateral

Cross-border payments

Regulation (EC) No 924/2009 on cross-border payments in the Community stipulates that charges applied to cross-border payments in euro must be the same as those levied by the payment service provider in question for corresponding national payments of the same value and in the same currency. The regulation applies to all electronically processed payments, including credit transfers, direct debits, cash withdrawals at cash dispensers (ATMs), payments by means of debit and credit cards, and money remittance.

Legal initiatives

The four most important current legal initiatives are:

European Market Infrastructure Regulation

Following the G20 commitment to clear standardised over-the-counter (OTC) derivatives via central counterparties (CCPs) and to use trade repositories, the Commission has proposed a regulation, known as the European Market Infrastructure Regulation or EMIR. This would ensure that CCPs comply with high prudential standards, that trade repositories are subject to adequate regulation and that issues of licensing, third-country recognition, ongoing supervision and operational conditions are harmonised throughout the European Union to mitigate risks from the activities of CCPs and trade repositories.

Regulation for Central Securities Depositories

The Commission is also in the process of drafting a regulation for central securities depositories (CSDs) covering the identification of core and ancillary services, licensing, on-going supervision, cross-border provision of services and prudential requirements for CSDs, as well as operational conditions to address risks stemming from their activities. The future regulation is expected to introduce a sound legal framework for CSD services, improve legal certainty and foster a level playing field in the Union.

Securities Law Directive

To dismantle legal barriers that impede efficient cross-border securities settlement, a legal act, known as the Securities Law Directive, is under preparation, which aims to harmonise:

  • the legal framework for holding and transferring book entry securities;
  • the conflict of law rules;
  • the rights and obligations of account providers; and (iv) the rights flowing from book entry securities.

SEPA migration end-date regulation

Regulation 260/2012 establishing the technical requirements for credit transfers and direct debits in euro ("SEPA migration end-date regulation") came into effect on 31 March 2012. The aim is to ensure a quick and smooth migration to pan-European credit transfers and direct debits by phasing out existing national payment instruments. In order to ensure interoperability, certain common standards and technical requirements are, or will become, mandatory in the EU for all credit transfers and direct debits denominated in euro.