11.6.98 Official Journal of the European Communities L 166/45 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 EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 100a thereof, Having regard to the proposal from the Commission ('), Having regard to the opinion of the European Monetary Institute (%), Having regard to the opinion of the Economic and Social Committee (%), Acting in accordance with the procedure laid down in Atrticle 189b of the Treaty (%), (1) Whereas the Lamfalussy report of 1990 to the Governors of the central banks of the Group of Ten Countries demonstrated the important systemic risk inherent in payment systems which operate on the basis of several legal types of payment netting, in particular multilateral netting; whereas the reduction of legal risks associated with participa- tion in real time gross settlement systems is of paramount importance, given the increasing devel- opment of these systems; (2) Whereas it is also of the utmost importance to reduce the risk associated with participation in securities settlement systems, in particular where there is a close connection between such systems and payment systems; (3) Whereas this Directive aims at contributing to the efficient and cost effective operation of cross- border payment and securities settlement arrange- ments in the Community, which reinforces the freedom of movement of capital in the internal market; whereas this Directive thereby follows up the progress made towards completion of the internal market, in particular towards the freedom to provide services and liberalisation of capital movements, with a view to the realisation of Economic and Monetary Union; ) OJ C 207, 18. 7. 1996, p. 13, and OJ C 259, 26. 8. 1997, p. 6. ( ( Opinion delivered on 21 November 1996. () OJ C 56, 24. 2. 1997, p. 1. (Y) Opinion of the European Parliament of 9 April 1997 (O] C 132, 28. 4. 1997, p. 74), Council Common Position of 13 October 1997 (O] C 375, 10. 12. 1997, p. 34) and Decision of the European Parliament of 29 January 1998 (O] C 56, 23. 2. 1998). Council Decision of 27 April 1998. ) Whereas it is desirable that the laws of the Member States should aim to minimise the disruption to a system caused by insolvency proceedings against a participant in that system; Whereas a proposal for a Directive on the reorgan- isation and winding-up of credit institutions submitted in 1985 and amended on 8 February 1988 is still pending before the Council; whereas the Convention on Insolvency Proceedings drawn up on 23 November 1995 by the Member States meeting within the Council explicitly excludes insurance undertakings, credit institutions and investment firms; Whereas this Directive is intended to cover payment and securities settlement systems of a domestic as well as of a cross-border nature; whereas the Directive is applicable to Community systems and to collateral security constituted by their participants, be they Community or third country participants, in connection with participa- tion in these systems; Whereas Member States may apply the provisions of this Directive to their domestic institutions which participate directly in third country systems and to collateral security provided in connection with participation in such systems; Whereas Member States should be allowed to designate as a system covered by this Directive a system whose main activity is the settlement of securities even if the system to a limited extent also deals with commodity derivatives; Whereas the reduction of systemic risk requires in particular the finality of settlement and the enfor- ceability of collateral security; whereas collateral security is meant to comprise all means provided by a participant to the other participants in the payment and/or securities settlement systems to secure rights and obligations in connection with that system, including repurchase agreements, statutory liens and fiduciary transfers; whereas regu- lation in national law of the kind of collateral security which can be used should not be affected by the definition of collateral security in this Directive;