Treasury is consulting on implementation of the changes to the Settlement Finality Directive (SFD) and the Financial Collateral Directive (FCD) in the UK. The changes to the Directives cover:

  • interoperable systems by changing various definitions and introducing new terms to ensure interoperable systems come within the regime;
  • clarifications on calendar days and moments of entry. The SFD’s protections apply to settlements that take place on the same business day that insolvency proceedings start, and make settlement systems seek to co-ordinate their rules on the moment of entry and irrevocability of transfer orders; and
  • bringing credit claims (loans) within the scope of the FCD.

Key consultation questions include:

  • whether to bring e-money institutions within the scope of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (the SFR) ; and
  • whether foreign insolvency acts or orders should not be enforceable in the UK if their UK equivalent would be unenforceable because of protections in the Financial Collateral Arrangements (No.2) Regulations 2003 (FCR).

The consultation predominantly covers the changes Treasury must make to comply with the changes to the Directives. But it is also consulting on:

  • whether to bring within the scope of FCR all floating charges that fall within the definition of “collateral security charges” in the SFR; and
  • whether to extend SFD protections to non-EEA settlement systems.

Treasury asks for comment by 29 October and must make the necessary legislative changes by 30 December 2010 and bring them into force by 30 June 2011.