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| Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on financial collateral arrangements by the Commission of the European Communities March 27, 2001 Introduction: Since the beginning of the 1990's a number of professional bodies have raised awareness about the legal uncertainty faced by payment and securities settlement systems, central banks and participants in the financial markets. This is reflected in the increasing flows in these systems and their significance for a well functioning modern society. The increased volumes also caused a higher degree of credit exposure for market participants, giving them strong incentives to reduce risk through netting or collateralization. Many Member States have accordingly introduced netting legislation or revised their legislation, resulting in a considerable convergence of netting laws across the European Union. In particular, the 1998 Directive on Settlement Finality 1 constituted a milestone in establishing a sound legal framework for payment and securities settlement systems. The Directive also covers collateral security provided in connection with operations of the Central Banks of the Member States and the European Central Bank in the performance of their central banking functions (including their monetary policy). The Directive therefore promotes the efficiency of cross-border operations necessary for the smooth functioning of the Eurosystem (the European Central Bank and the national Central Banks of Member States participating in the Economic and Monetary Union)... |   
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