The Directive 98/26/EC on settlement finality in payment and securities settlement systems entered into force on 19 May 1998 and gives privileged legal protection within the European Union for the execution of transfer orders accepted by the systems, the settlement by netting, to the collaterals and bails provided for as coverage for the fulfilment of the obligations of the participants in the systems. Objective of the directive is to limit all risks that may arise from a possible insolvency of participants of the system and from the fact that it may extend to the whole system. The full domestic harmonization of the Directive was implemented by the Act XXIII of 2003 on the settlement finality in payment and securities settlement systems that entered into force simultaneously with the accession to the European Union. As a core principle it is set forth in the Act that, in the case of insolvency proceedings (liquidation procedure or supervisory measure restricting payments) are initiated against a participant of the payment or securities settlement system, the relevant decisions made or measures taken in the course of these proceedings shall not have retroactive, or derogatory effects on the rights or obligations of the participants arising from, or in  connection with their participation in the system earlier  than the moment of opening such an solvency proceedings. Accordingly, execution of transfer orders and netting entered into and accepted by the system prior to the receipt of a notification on initiation of insolvency proceedings, shall be binding on third parties and legally indefeasible, and the collaterals and bails provided for as coverage for the fulfilment of the obligations in the system by the participant under insolvency proceedings shall not be withdrawn during such proceedings.

The Act empowers the MNB to function as the authority designating the systems to be included in the scope of the Act and at the same time specifies the other responsibilities of the designating authority, primarily the obligation of notification.

Until now, the Interbank Clearing System operated by the GIRO Zrt. and the Securities Settlement System of KELER Zrt. has been designated under a public administration authority procedure. The payment system operated by the MNB (VIBER) was declared by the act as an ab ovo designated system.

The MNB as designating authority is obliged to immediately send notification on designation of systems as well as on withdrawal of designation to the European Commission, which will publish the designated systems operating in the European Union and the designating authorities on its website. Upon  receipt of a notification by the court or any other authority entitled to take such measures (in Hungary these are the Metropolitan Court of Budapest and the Hungarian Financial Supervisory Authority), the MNB shall notify the competent designating authorities of all other Member States on the initiation of insolvency proceedings. And it shall forward all similar notification received from the Member States on initiation of insolvency proceedings against a foreign participant of the designated system to the operator of the domestic system.