S.I. No. 539/1998:

EUROPEAN COMMUNITIES (FINALITY OF SETTLEMENT IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS) REGULATIONS, 1998.

EUROPEAN COMMUNITIES (FINALITY OF SETTLEMENT IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS) REGULATIONS, 1998.

I, Charlie McCreevy, Minister for Finance, in exercise of the powers conferred on me by section 3 of the European Communities Act, 1972 (No. 27 of 1972), and for the purpose of giving effect to Directive 98/26EC of the European Parliament and of the Council of 19 May 1998*, hereby make the following regulations:

1. (1) These Regulations may be cited as the European Communities (Finality of Settlement in Payment and Securities Settlement Systems) Regulations, 1998.

(2) These Regulations shall come into operation on the fourth day of January, 1999.

2. (1) In these Regulations, except where the context otherwise requires -

"the Bank" means the Central Bank of Ireland;

"collateral security" means all realisable assets provided under a pledge (including money provided under a pledge), a repurchase or similar agreement, or otherwise, for the purpose of securing rights and obligations potentially arising in connection with a payment system or provided to central banks of the Member States of the European Union or to the European Central Bank;

"credit institution" has the meaning assigned to it by the European Communities (Licensing and Supervision of Credit Institutions) Regulations, 1992 ( S.I. No. 395 of 1992 );

"financial institution" means an undertaking other than a credit institution providing any one or more of the financial services set out in the Schedule to the European Communities (Licensing and Supervision of Credit Institutions) Regulations, 1992, ( S.I. No. 395 of 1992 );

"member" means a credit institution or financial institution, a central counterparty, a settlement agent or a clearing house which is a member of a payment system and nothing in these Regulations shall prevent a member acting as a central counterparty, a settlement agent or a clearing house or carrying out part or all of these tasks;

"the opening of insolvency proceedings" means the granting by the High Court of an order for the winding-up of a member of a payment system;

"netting" means the conversion into one net claim or one net obligation of claims and obligations resulting from transfer orders within a payment system that a member or members either issue to, or receive from, one or more other members of the payment system with the result that only a net claim can be demanded or a net obligation be owed;

"payment system" has the meaning set out in section 5 of the Central Bank Act, 1997 (No. 8 of 1997);

"settlement agent" means an entity providing to institutions or to a central counterparty participating in a payment system settlement accounts through which transfer orders within such systems are settled and, as the case may be, extending credit to those institutions and central counterparties for settlement purposes;

"transfer order" means -

(a) any instruction by a member to place at the disposal of another member an amount of money by means of a book entry on the accounts of a credit institution, a central bank or a settlement agent, or any instruction which results in the assumption or discharge of a payment obligation as defined by the rules of the system, or

(b) an instruction by a member to transfer the title to, or interest in, a security or securities by means of a book entry on a register, or otherwise.

(2) A word or expression that is used in these Regulations and is also used in Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998*, shall, unless the contrary intention is expressed, have in these Regulations the same meaning that it has in that Directive.

3. (1) A transfer order within a payment system shall be binding, even in the event of insolvency proceedings against a member, and shall be binding on third parties, where the transfer order was entered into the payment system before the moment of opening of insolvency proceedings against the member.

(2) Netting within a payment system shall be binding on members, even in the event of insolvency proceedings against a member, and shall be binding on third parties, where the transfer orders involved in the netting were entered into the payment system before the moment of opening of insolvency proceedings against the member.

(3) Where a transfer order is entered into a payment system after the moment of opening of insolvency proceedings against a member of the payment system and the order is executed on the day of opening of insolvency proceedings against the member, the order shall be legally binding only if, after the order is executed, the settlement agent, the central counterparty or the clearing house can prove that they were not aware, and should not have been aware, of the opening of insolvency proceedings against the member.

(4) No law, regulation, rule or practice on the setting aside of contracts and transactions concluded before the moment of the opening of insolvency proceedings against a member of a payment system shall lead to the unwinding of a netting.

4. (1) The rules of a payment system shall specify the moment at which a transfer order shall be considered to have been entered into the payment system.

(2) A transfer order may not be revoked from the moment specified in accordance wit paragraph (1) of this Regulation

5. (1) The High Court shall notify the Bank immediately upon granting an order for the winding up of a member of a payment system.

(2) Upon receipt of such notification, the Bank shall immediately notify the appropriate authorities in the other Member States of the European Union of the order.

(3) In the event of the opening of insolvency proceedings against a member of a payment system, the rights and obligations of the member of the payment system arising from membership of the payment system prior to the opening of insolvency proceedings against the member shall not be affected in any way by the opening of insolvency proceedings against the member.

6. Notwithstanding any provision to the contrary contained in the law of the State relating to bankruptcy, receivership, examinership or liquidation, where insolvency proceedings are commenced under the law of the State against a member of a payment system, the rights and obligations of the member arising from the participation of that member in the payment system shall be determined in accordance with the law of the Member State under which the payment system operates.

7. (1) The rights of -

(a) a member of a payment system to collateral security provided to it in connection with its participation in the payment system, and

(b) central banks of the Member States and of the European Central Bank to collateral security provided to them,

shall not be affected by insolvency proceedings against the member or against a counterparty to a central bank of a Member State or the European Central Bank which provided the collateral security and such collateral security may be realised for the satisfaction of those rights

(2) Where securities (including rights in securities) are provided as collateral security to members or to central banks of the Member States or to the European Central Bank, and their right (or that of any nominee, agent or third party acting on their behalf) with respect to the securities is legally recorded on a register, account or centralised deposit system located in a Member State of the European Union, the determination of the rights of such entities as holders of the collateral security in relation to those securities shall be governed by the law of that Member State.

8. The operators of a payment system shall notify the Bank of the membership of the system, including any possible indirect participants, and shall immediately notify it of any change in the membership of the payment system.

9. A holder of a licence issued under section 9 of the Central Bank Act, 1971 (No. 24 of 1971), shall inform any person with a legitimate interest of the payment systems of which it is a member and shall provide information about the main rules governing the functioning of those payment systems.

Given under my Official Seal, this 31st day of December, 1998.

CHARLIE McCREEVY,

Minister for Finance

EXPLANATORY NOTE

This Statutory Instrument transposes the mandatory provisions of Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems.

The primary aim of the Directive is to reduce the legal risks associated with participation in settlement systems, in particular as regards the legality of netting agreements and the enforceability of collateral security.

The Directive's provisions apply to any EC payment or securities settlements system operating in any currency or the euro, any EC institution which participates in such a system, collateral security provided in connection with participation in such a system, and collateral security provided in connection with monetary policy operations.