SEPA Legal and Regulatory Framework
(Note: the European Payments Council (EPC), representing the European banking industry1 in relation to payments, is not a European Union (EU) legislative body. More generally, the EPC is not part of the EU institutional framework and has, therefore, no role in the adoption of EU legislation or other regulatory initiatives establishing Single Euro Payments Area (SEPA) compliance requirements.)
To achieve a Single Payment Area for the entire EU where there is no frontier effect for cross-border payments, the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU Member States' governments, adopted several legislative acts designed to drive forward the integration of the euro payments market
A brief introduction to the EU legislative process
The European Commission has the right of initiative to propose laws for adoption by the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU Member States' governments. (The Council of the EU is the EU institution where the Member States’ government representatives sit, i.e. the ministers of each EU Member State with responsibility for a given policy area.) The vast majority of European laws are adopted jointly by the European Parliament and the Council of the EU under the so-called ordinary legislative procedure. This legislative procedure gives the same weight to the European Parliament and the Council of the EU in a wide range of areas.
EU Directives lay down certain end results that must be achieved in every EU Member State. National authorities have to adapt their laws to meet these goals; i.e. have to implement an EU Directive, but are free to decide how to do so. National implementation measures are texts officially adopted by the authorities in an EU Member State to incorporate the provisions of an EU Directive into national law.
EU Regulations are the most direct form of EU law. As soon as they are passed, they have binding legal force throughout every EU Member State, on a par with national laws. National governments do not have to take action themselves to implement EU Regulations.
For further information on the EU legislative process, refer to the last four links included within the information box at the end of this page.
Regulation (EU) No 260/2012 defines mandatory deadlines for migration to SEPA
In February 2012, the European co-legislators 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) (see links below). Article 6 (1) and (2) of the SEPA Regulation mandates that credit transfers and direct debits shall be carried out in accordance with the relevant requirements set out in Article 5 of and in the Annex to the Regulation by 1 February 2014, subject to certain limited exemptions mentioned in the Regulation. In order to avoid difficulties for non-compliant market participants, in February 2014 the European Commission, the European Parliament and EU governments agreed amending the SEPA Regulation to give the option to continue processing non-SEPA formats until 1 August 2014 (see link to ‘Regulation (EU) No 248/2014 amending Regulation (EU) No 260/2012 as regards the migration to Union-wide credit transfers and direct debits’ below). 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).
SCT and SDD Schemes have to comply with Regulation (EU) No 260/2012 (the SEPA Regulation)
The SCT and SDD Schemes have to comply with the technical requirements detailed in Article 5 of 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).
Article 10 of the SEPA Regulation details how this legislative act is to be enforced. It clarifies that EU Member States must designate the competent authorities responsible to ensure compliance with this Regulation (see link to European Commission Website below to find the list of designated authorities).
Transitional arrangements in EU Member States permissible under Regulation 260/2012 (the SEPA Regulation)
The SEPA Regulation has introduced several possible exemptions regarding the use of the International Bank Account Number (IBAN), the Business Identifier Code (BIC) and the ISO 20022 XML message standards by the February 2014 deadline. EU Member States had discretion as to whether they would use any or all of the options to derogate from the 1 February 2014 deadline (until 1 February 2016) with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards by payment service users.
EU Member States were required to notify the European Commission by 1 February 2013 which derogations they will use. Information on transitional arrangements in EU Member States permissible under the SEPA Regulation is published by the European Commission (see link below).
Directive 2007/64/EC on payment services in the internal market (Payment Services Directive)
The Directive 2007/64/EC of the European Parliament and of the Council of the EU of 13 November 2007 on payment services in the internal market (see link below), generally referred to as the Payment Services Directive (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 one of the most significant and comprehensive pieces of EU financial services legislation in relation to the payments market. 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 direct debits.
On 23 December 2015, the revised Payment Services Directive, Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC, was published in the Official Journal of the European Union (PSD2). The PSD2 should be transposed by EU Member States in national law by 13 January 2018, as of which date the PSD will be repealed.
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 the EU of 16 September 2009 on cross-border payments in the community (see links below) and repealing Regulation (EC) No 2560/2001, introduced 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 pricing of euro cross-border direct debits are as of November 2009 aligned on that of local transactions (as it was already the case for credit transfers and card transactions).
- 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 were 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'.
1 The EPC represents ‘payment service providers’ as defined in Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (i.e. the Payment Services Directive), as amended from time to time.
Selection of articles from the EPC Newsletter and other sources
- EPC Newsletter: All Articles Published in the ‘Legal and Regulatory Issues' Section
- 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)
- Regulation (EU) No 248/2014 amending Regulation (EU) No 260/2012 as regards the migration to Union-wide credit transfers and direct debits
- European Commission Website: Information on Transitional Arrangements in EU Member States Permissible Under Regulation 260/2012 (the SEPA Regulation) and List of Competent Authorities Responsible for Ensuring Compliance
- EPC Newsletter: The Time to Act is Now: Impact of the SEPA Regulation on Payment Service Users
- EPC Newsletter: Evolution and Oversight of the SEPA Credit Transfer and SEPA Direct Debit Schemes: the Role of the European Commission and of the European Central Bank
- 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
- EPC Newsletter: PSD2 – EPC Key Considerations Address Aspects Related to Third Party Payment Service Providers and Article 67 (Refund Rights for Direct Debits)
- EPC Response to European Commission Green Paper 'Towards an Integrated European Market for Card, Internet and Mobile Payments'
- European Commission: Directive on Payment Services (PSD)
- Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market (revised Payment Services Directive, PSD2)
- PSD Expert Group: PSD Guidance Document (August 2009)
- PSD Expert Group: Addendum to PSD Guidance Document (June 2010)
- Regulation (EC) No 924/2009 on Cross-border payments in the Community and repealing Regulation (EC) No 2560/2011
- European Parliament/EuroparlTV Website: Video 'How it works: European Laws'
- European Parliament Website: Legislative Powers
- European Commission Website: Application of EU Law/Regulations
- European Commission Website: Application of EU Law/Directives