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DRAFT REPORT (COM(2025)0941 – C100329/2025 – 2025/0381(COD))

On the proposal for a regulation of the European Parliament and of the Council on settlement finality and repealing Directive 98/26/EC and amending Directive 2002/47/EC on financial collateral arrangements

ECON-PR-789875

Committee on Economic and Monetary Affairs · Rapporteur: Giovanni Crosetto

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The rapporteur's draft report sets out Parliament's first-reading amendments to the proposed regulation on settlement finality, which would repeal Directive 98/26/EC and amend Directive 2002/47/EC on financial collateral arrangements. The amendments add a definition of final settlement, align the definition of securities settlement system with Regulation (EU) No 909/2014, and widen the definitions of participant, indirect participant and collateral to cover distributed ledger technology, tokenised assets, default funds and margins. They require common rules and standardised procedures to identify liability and designate a legal representative where more than one entity operates a system, and delete the rule making consortium members jointly and severally liable. They empower ESMA and EBA to draft regulatory technical standards on the moment of irrevocability and the moment of final settlement, and require interoperable systems to coordinate their rules on those moments across the Union. They let settlement agents use an insolvent entity's funds, financial instruments and credit lines to complete settlement, add notification duties for designated and registered systems, and extend collateral enforcement and conflict-of-law rules. Transitional rules keep systems designated or registered under Directive 98/26/EC protected for up to five years, with streamlined re-designation and registration, and the rapporteur calls for legal certainty, technological neutrality and continuity of protection.

Committee position. The rapporteur welcomes the Commission's proposal to replace Directive 98/26/EC with a directly applicable regulation and tables 33 amendments to strengthen legal certainty, technological neutrality, protection of settlement agents, collateral clarity and transitional continuity.

Key points

  1. The draft report adopts Parliament's first-reading position on the Commission proposal for a settlement finality regulation, which would repeal Directive 98/26/EC and amend Directive 2002/47/EC.
  2. Amendment 1 adds a definition of 'final settlement' as the completed discharge of obligations in an unconditional and irrevocable manner under common rules and standardised procedures.
  3. Amendment 2 defines 'securities settlement system' by reference to settlement as defined in Article 2(1), point (7), of Regulation (EU) No 909/2014.
  4. Amendments 3 and 4 widen who counts as a participant, allowing any entity permitted under the rules of a designated or registered system.
  5. Amendment 7 broadens 'collateral' and 'collateral security' to cover assets issued or recorded using distributed ledger technology, tokenised form, default funds held by CCPs authorised under Article 14 of Regulation (EU) No 648/2012 and margins under Article 41 of that Regulation.
  6. Amendment 8 allows natural or legal persons to be added as participants and indirect participants, based on experience with DLT settlement systems subject to Regulation (EU) 2022/858.
  7. Amendments 9 and 10 require common rules and standardised procedures to identify what liability each entity has and to designate one entity as legal representative where more than one entity operates a system; Amendment 11 deletes the joint and several liability rule for consortia.
  8. Amendment 14 lets a settlement agent use an insolvent entity's settlement account funds and financial instruments, and credit lines opened against an existing guarantee, to fulfil obligations arising before insolvency proceedings.
  9. Amendments 15 and 17 require ESMA and EBA to develop draft regulatory technical standards on the moment of irrevocability and the moment of final settlement, with the Commission empowered to adopt them by delegated act.
  10. Amendments 16 and 18 require each interoperable system to determine the moment of irrevocability and final settlement on the basis of standardised definitions and procedures coordinated across the Union.
  11. Amendments 23 and 24 require competent authorities to notify the designating or registering authority, which must notify the system operator, when a participant in a designated or registered system is subject to a decision.
  12. Amendments 28 to 31 keep systems designated or registered under Directive 98/26/EC protected for up to five years, or longer if an application is pending, and require streamlined re-designation and registration.

Who is affected

  • Settlement systems and their operators, which face new rules on liability, legal representation and coordinated settlement moments.
  • Participants and indirect participants, including natural or legal persons in DLT settlement systems, whose eligibility is widened.
  • Settlement agents, who may use an insolvent entity's funds, instruments and credit lines to complete settlement.
  • Third-country systems and their operators, which must meet conditions and can be deregistered if remedial actions are not taken.
  • Central banks and the European Central Bank, whose collateral and conflict-of-law protections are extended.

Figures and deadlines

  • 12 months after the date of entry into force of this Regulation — deadline for ESMA and EBA to develop draft regulatory technical standards on irrevocability.
  • 12 months after the date of entry into force of this Regulation — deadline for ESMA and EBA to develop draft regulatory technical standards on final settlement.
  • 5 years after the entry into force of this Regulation — end of transitional protection for systems designated under Directive 98/26/EC.
  • 5 years after the entry into force of this Regulation — end of transitional protection for third-country systems registered in a Member State.

Legal basis: Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union.