Unified Rules for Money Settlements in Europe

What the problem that is being addressed
The EU’s settlement‑finality rules (the old Directive 98/26/EC) are applied differently in each Member State. This creates legal uncertainty, extra costs, and barriers for companies that trade or settle securities and payments across borders. The rules also do not fully cover new technologies such as distributed‑ledger technology (DLT) and tokenised assets, which limits innovation and market integration.

How that problem is being solved here
The Commission proposes to replace the Directive with a Regulation – the Settlement Finality Regulation (SFR).

• The SFR sets one set of rules that all EU systems must follow, removing national differences.
• It updates key definitions (e.g., “system”, “participant”, “transfer order”) so that DLT‑based systems and tokenised securities are treated the same as traditional ones.
• It creates a single, central database that lets national authorities, ESMA, EBA and the ECB/ESCB share information about system designation, registration and insolvency events.
• It clarifies the moments when a transfer order becomes irrevocable and final, and it protects collateral even if a participant becomes insolvent.
• It gives Member States a clear, harmonised procedure for designating EU systems and for registering third‑country systems that EU participants use.

What changes as a result of this document

• The old Directive 98/26/EC is repealed and replaced by the SFR, which applies directly in all Member States.
• All EU payment, securities settlement and clearing systems must be designated under the SFR, following new common rules and a new designation procedure.
• Third‑country systems that EU participants use must be registered in the EU, with a harmonised registration process.
• The central database will be set up by ESMA, giving all relevant authorities instant access to designation, registration and insolvency information.
• The SFR introduces new, technology‑neutral definitions that include DLT and tokenised assets, and it amends Directive 2002/47/EC to extend its scope to DLT‑issued cash, securities and credit claims.
• The Regulation includes transitional measures: systems already designated under the old Directive remain valid until they are re‑designated or until five years after the Regulation enters into force.
• The Commission will report on the Regulation’s implementation six years after it takes effect, and ESMA will report on the functioning of the settlement‑finality regime five years after entry into force.

These changes aim to give the EU a single, predictable settlement‑finality regime, reduce cross‑border costs, support new technologies, and strengthen the overall resilience of the EU capital markets.