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The ECB issued its opinion on the Commission proposal amending the settlement finality and the financial collateral directives.
The ECB proposes some changes to the Commission draft text, in particular one on the protection of collateral from the effects of insolvency. Further clarification of the wording would ensure the harmonised insulation of collateral security provided to central banks by any third party including, but not limited to, affiliates of the participants in a central bank operated system or central bank counterparties, ECB argues.
This would ensure legal certainty with respect to collateralised credit provided by central banks and, more specifically, protect modern liquidity pooling services, for example in TARGET2, against the insolvency of any third party providing collateral security on behalf of a participant in a central bank system. This reform could be of particular relevance to central bank liquidity operations during times of financial difficulty, where it can be expected that liquidity extended to a counterparty might be collateralised by a third party on behalf of the counterparty.
Another amendment is made on the notification of system operators and oversight in so far as the definition of a system operator should be amended to ensure that it also covers systems that consist of several participants without any single system operator.
ECB Opinion