European Commission and Directorate-General for Financial Stability, Financial Services and Capital Markets Union 4 December 2025, Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on settlement finality and repealing Directive 98/26/EC and amending Directive 2002/47/EC on financial collateral arrangements

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This European Commission proposal (COM(2025) 941 final) converts Directive 98/26/EC on settlement finality into a directly applicable Regulation under Article 114 TFEU, with the primary purpose of eliminating divergences arising from inconsistent national transposition that have fragmented the EU single market for payment and securities settlement systems. Key provisions establish harmonised conditions and procedures for the designation of EU systems and registration of third-country systems, define uniform settlement finality moments (entry, irrevocability, and final settlement), insulate transfer orders and netting arrangements from insolvency proceedings, and extend technological neutrality to distributed ledger technology (DLT)-based systems, while also amending Directive 2002/47/EC on financial collateral arrangements to ensure consistency with DLT-issued instruments. Enforcement and convergence are entrusted to national competent authorities, ESMA, EBA, and the ESCB, with ESMA mandated to establish a central database for information exchange, and transitional provisions allowing systems designated under the repealed Directive to remain designated for up to five years pending re-designation under the new Regulation.AI