SEPA Legal and Regulatory Framework
The history of the Single Euro Payments Area (SEPA) project reaches back to 1990 with the publication of the European Commission report: 'Making Payments in the Internal Market', which outlined a community vision of a single payments area. This document stated that "the full benefits of the single market will only be achieved if it is possible for business and individuals to transfer money as rapidly, reliably and cheaply from one part of the community to another as is now the case within most member states". To achieve this goal, the European authorities adopted several legislative acts designed to drive forward the integration of the euro payments market.
Regulation (EC) No 2560/2001 on cross-border payments in euro
The European legislator laid the foundations of the SEPA policy through Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro. The Regulation states that banks are not permitted to impose different charges for domestic and cross-border payments or automated teller machine (ATM) withdrawals within the European Union (EU). This Regulation has also generally been understood as a turning point in the financial integration policy of the European legislator beyond its formal stipulations, as the Regulation was clearly intended to shock the banking sector into stepping up its efforts to achieve SEPA. Regulation (EC) No 2560/2001 was superseded by Regulation (EC) No 924/2009 (see below).
Regulation (EC) No 924/2009 on cross-border payments in the Community
Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the community and repealing Regulation (EC) No 2560/2001, introduces additional provisions which - in the eyes of the regulator - further promote EU financial integration in general and SEPA implementation in particular. It has significant impact due to the introduction of the following provisions:
- The price parity requirements are extended to direct debits.
- The setting of clear rules for transaction-based multilateral interchange fees until November 2012.
- Since November 2010, banks in the euro area offering direct debits in euro to debtors are mandated to be reachable for cross-border direct debit collections.
Regulation (EC) No 924/2009 became applicable across all EU Member States on 1 November 2009.
The provisions regarding interchange fees set out in Regulation (EC) No 924/2009 are amended in accordance with the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (see headline 'Regulation (EU) No 260/2012 defines mandatory deadlines for migration to SEPA' below).
Directive 2007/64/EC on payment services in the internal market (Payment Services Directive)
The European Commission recognised that integration of the euro payments market would only be possible within a common legal environment that would remove the local anomalies and differences. The first version of a 'New Legal Framework for Payments', designed to harmonise the fragmented national legal provisions, was issued in 2001. This working document ultimately resulted in the Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market. This Directive is generally referred to as the Payment Services Directive (PSD). The PSD was implemented by most EU Member States by 1 November, 2009. The PSD aims at establishing a modern and comprehensive set of rules applicable to all electronic payment services - not just SEPA services - in the EU. The PSD is not a 'SEPA Directive', but rather, the very broad and ambitious scope of the PSD makes it the most significant and comprehensive piece of EU financial services legislation in relation to the payments market ever seen. The PSD is of particular relevance with respect to the roll-out of SEPA Direct Debit services due to the fact that the PSD introduces common rules for the authorisation and the revocation of debits.
Article 87 of the PSD requires the European Commission to present a report on the implementation and impact of the Directive, together with proposals for its revision. It has been suggested that the PSD2 proposals will be published in the spring of 2013, although it should be noted that this has not been officially confirmed.
Regulation (EU) No 260/2012 defines mandatory deadlines for migration to SEPA
In February 2012, the European legislator adopted the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation), which defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. In non euro countries, the deadline will be 31 October 2016. Effectively, this means that as of these dates, existing national euro credit transfer and direct debit schemes will be replaced by SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD).
The SCT and SDD Schemes will have to comply with the technical requirements detailed in Article 5 and in the Annex to the SEPA Regulation. The SEPA Regulation empowers the European Commission to amend the technical requirements set out in the Annex to the Regulation through delegated acts.
For more information, refer also to these dedicated pages on the EPC Website:
- SCT/SDD Rulebook Release Management and Scheme Development.
- IBAN and BIC.
- ISO 20022 Message Standards (SEPA Data Formats).
- The SDD Mandate.
- The Creditor-Driven-Mandate Flow (CMF).
The text of the SEPA Regulation and other sources related to this legislative act are included in the information box on this page (see links below). For more information, visit also this dedicated page on the EPC Website: The EPC Migration Tool Kit: Get Ready for SEPA by 1.2.2014. Act Now!.
European Central Bank makes available fact sheets on national implementation of Regulation (EU) No 260/2012
The SEPA Regulation defines 1 February 2014 as the deadline in the euro area for compliance with its provisions, subject to certain limited exemptions mentioned therein. EU Member States have the option to extend the deadline for compliance with some of the SEPA Regulation's provisions until February 2016. Article 16 (7) of the SEPA Regulation states that EU Member States must notify the European Commission of the derogations that they intend to use by 1 February 2013. In September 2012, the European Central Bank (ECB) published fact sheets providing country-specific information related to the SEPA Regulation.
The ECB Website states: "In order to ensure a coordinated, coherent and integrated migration to SEPA credit transfers and direct debits, Regulation No 260/2012 sets common deadlines for the implementation of all requirements. However, as the level of development of credit transfers and direct debits differs from one EU Member State to another, and as there are certain legacy payment services with very specific functionalities in some countries, the regulation allows Member States to apply a few specific transitional arrangements for a limited period of time beyond the common end dates. In countries with currencies other than the euro, other deadlines and options for transitional arrangements can apply. Country-specific information relating to the transitional arrangements chosen by individual Member States is presented in two tables; one with information on euro area Member States and one with information on non-euro area Member States. This overview of 'national facts' will be updated and completed when new information becomes available."
The ECB fact sheets can be downloaded from the ECB Website.
Selection of articles from the EPC Newsletter and other sources
- Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009 (the SEPA Regulation)
- European Commission Website
- EPC Newsletter: The Time to Act is Now: Impact of the SEPA Regulation on Payment Service Users
- EPC Newsletter: The New European Decision-Making Landscape: How the European Commission Rules Through 'Delegated Acts'
- Payments Regulatory Expert Group (PREG): Practical Guidance for the Implementation of Regulation (EU) No 260/2012 Establishing Technical and Business Requirements for Credit Transfers and Direct Debits in Euro and Amending Regulation (EC) No 924/2009
- Euro Banking Association: Banks Preparing for SEPA Migration. A Guide to the SEPA Migration End-Date Regulation
- Regulation (EC) No 2560/2001 on cross-border payments in euro
- Regulation (EC) No 924/2009 on Cross-border payments in the Community and repealing Regulation (EC) No 2560/2011
- Directive 2007/64/EC on payment services in the internal market (Payment Services Directive - PSD)
- PSD Expert Group: PSD Guidance Document (August 2009)
- PSD Expert Group: Addendum to PSD Guidance Document (June 2010)
- EPC Newsletter: Articles Published in the ‘Legal and Regulatory Issues' Section