Settlement Finality in the European Union

Since the 1990 Lamfalussy Report, which highlighted the risk involved in
payment and securities settlement systems, a much clearer understanding of the
relevant risks has developed among the international banking community
resulting, inter alia, in the recognition of the need for a cross-border legal
framework which ensures the finality of the settlement and reinforces the
netting and collateral arrangements which are implemented by most
(cross-border) payment and securities settlement systems. This recognition has
led to the adoption of the Settlement Finality Directive (the 'Directive')
whose objective is to reduce systemic risk inherent in payment and securities
settlement systems. As recital 9 of the Directive states,.the reduction of
systemic risk requires in particular the finality of settlement and the
enforceability of collateral security.