The Ministry of Justice in Finland has recently completed its proposal for implementation in Finland of the European Directive (2009/44/EC) amending Directives 98/26/EC and 2002/47/EC on settlement finality in payment and securities settlement systems and financial collateral arrangements, respectively. The Directive is intended to be implemented through amendments to, inter alia, the Finnish Act on Certain Terms Relating to Securities and Currency Trade and Clearing Systems (the “Netting Act”) and the Act on Financial Collateral (the “Financial Collateral Act”).
Due to increased cross-border activity amongst settlement systems and the need for further certainty in respect of the night-time settlement of securities transactions, a number of more or less technical amendments in line with the European initiative are being proposed to the Netting Act. In practice, these amendments include the broadening of the definition of settlement systems in the Netting Act, which, going forward will encompass besides entities operating such settlement systems and the participants thereto, also other equivalent parties. Moreover, under the current Netting Act, obligations that have been entered into the settlement system on same day as the insolvency proceedings of a participant are commenced can be netted during the same day, provided that the entity operating the settlement system was not aware or should not have been aware of the commencement of insolvency proceedings at the time the obligations were netted. Such same day netting under the Netting Act is now proposed to be extended also to the night-time settlement of obligations.
As regards financial collateral arrangements, the proposed amendments to the Financial Collateral Act intend to extend the protection of the Act to cover also the use of new types of collateral in the relevant marketplaces, such as loan receivables and credit claims. It is intended that, for the purposes of the Financial Collateral Act, such new types of collateral would cover loans granted mainly by credit institutions, electronic money institutions and entities provided for in Article 4 of the European Directive on the taking up and pursuit of the business of credit institutions (2006/48/EC) (i.e. in Finland, Teollisen yhteistyön rahasto Oy and the Finnish Export Credit Agency, Finnvera Oyj).
The proposed legislation in respect of financial collateral arrangements is intended to enter into force on 30 December 2010, whereas amendments to the Netting Act shall enter into force some three months later.