-The use of collateral to back cross-border payment and securities transactions has increased substantially in the EU. The 1998 Directive on Settlement Finality2 constitutes a milestone in establishing a sound legal framework for payment and securities settlement systems. However, the increased use of collateral has systemic implications in the event of failures by market operators, and the potential to further develop the use of collateral is also constrained.
Therefore, future research should be devoted to e.g.:
the applicable law governing collateral arrangements in general;
whether or not a pledge or title transfer is enforceable in the event of the insolvency of the collateral provider.
The Commission’s Financial Markets Action Plan has recognized the problem and accorded top priority to proposing a directive on the cross-border use of collateral, with the ultimate goal to provide legal certainty as regards validity and enforceability of collateral provided to back cross-border securities transactions.
The purpose of the Forum Group will be to advise the Commission as to the best way of achieving legal certainty as regards validity and enforceability of collateral provided for cross-border use.
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