In your view, which of the following initiatives will have the greatest impact on the European payments market?

European Commission proposal for revised Payment Services Directive (PSD2)
European Commission proposal for new Regulation on interchange fees for card-based payment transactions
Work programme of Euro Retail Payments Board, chaired by European Central Bank
SecuRe Pay Forum recommendations for security of internet payments; for payment account access services; for security of mobile payments
Guidelines and technical standards issued by European Banking Authority pursuant to mandate provided by proposed PSD2 (Articles 86, 87)
or show results

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Living with Basel III - The Impact on the Payments Market Viewed 5322 times

09-08-2011 By Ruth Wandhöfer, Member of the EPC Plenary and Chair of the EPC Information Security Support Group

In December 2010, the Basel Committee of Banking Supervision (BCBS) approved the revised prudential framework referred to as Basel III. The reforms establish new metrics for liquidity, leverage and stable funding. Basel III will affect banks that provide access to payment systems for their clients. Based on the new framework, banks will have to set aside liquid assets and prove stable funding to support settlement-related facilities. Uncommitted facilities will no longer be exempt from regulatory capital requirements. As a result of the new regulatory focus on intra-day liquidity, and the need to manage it as a scarce and costly resource, banks are increasingly likely to bear liquidity efficiency in mind when managing their payment services.

According to the recommendations of the BCBS; implementation of Basel III should be completed by 2018. The effects of these new measures will however, have an impact on the payments market long before this deadline. Some communities, notably the UK, have already begun to implement the liquidity regime element of Basel III. In the European Union (EU), the major provisions of Basel III will be implemented with the amended Capital Requirements Directive (CRD) referred to as CRD IV.

It is early days to fully predict how Basel III will affect the cost and systemic risk considerations underlying the provision of payment services. The one thing certain however, is this: Basel III marks only the beginning of increased regulatory scrutiny of the payment market with regard to potential systemic risks. In Europe, the new European Banking Authority is likely to play an important role in providing technical guidance around the implementation of CRD IV.

Another trend to keep an eye on is to what extent the tightened requirements introduced with Basel III will impact the expectations voiced in particular by the European Commission to open the euro payments landscape for new market participants. Based on this expectation, the Payment Services Directive (PSD) adopted by EU Member States in November 2009, introduced payment institutions (PIs) as a new category of non-bank payment service providers. Non-bank service providers active in payments are not subject to the stringent rules introduced with Basel III thus giving them a competitive advantage over banks.

It is also likely that Basel III will have a significant economic impact: the Institute for International Finance (IIF) and the European Banking Federation (EBF) estimate a negative economic impact of potentially one to two percent of GDP for the US economy and four to six percent of GDP for the European economy, with an estimated reduction of financial sector profits of two to four percent. And there is more to come: at its meeting in Seoul in November 2010, the G20 confirmed that additional measures would be imposed on systemically important financial institutions and globally important financial institutions which will trigger a change of their capital structure. Several of these institutions have already embarked on core capital-raising exercises to help secure their capital adequacy ratios.

What is your view? Join the discussion and share your predictions on the impact of Basel III on the payments market. For more information and related links, please view the article ‘Get Ready for More' in the EPC Newsletter, July 2011.


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Previous entries

28.08.14Learn More About Work Items Related to SEPA Credit Transfer and SEPA Direct Debit to be Addressed by the New Euro Retail Payments Board (ERPB) Chaired by the European Central Bank

07.08.14Summer Reading: Food for Thought on the Future of European Payments, Contributed to the EPC Newsletter by Experts Representing Various Market Segments

17.07.141 August 2014 Does Not Mark the End of the Migration Process. Get Ready for SEPA 2016. Act Now

01.07.14Participate in New EPC Poll: In Your View, Which Regulatory Initiatives Will Have the Greatest Impact on the European Payments Market Going Forward?

12.06.14PSD2: EPC Calls on EU Lawmakers to Maintain the Firewall Protecting Consumers Making Internet Payments. This Means: No Sharing of Any Personalised Security Credentials with Third Parties

19.05.14EPC Launches Three-Month Public Consultation on the Evolution of the SEPA Credit Transfer and SEPA Direct Debit Schemes. All Stakeholders are Invited to Provide Feedback by 15 August 2014

06.05.14Join the Debate on the Further Evolution of the SEPA Credit Transfer and SEPA Direct Debit Schemes: Less Flexibility, More Harmonisation? An Overview of the Options, Variations, Exceptions and Exemptions Possible in SEPA Today

15.04.14PSD2: The New Article 67, (‘Refunds for Payment Transactions Initiated By or Through a Payee’), Proposed by the European Commission Risks Undermining Consumer’s Unconditional Refund Right for Direct Debits Included with the SEPA Direct Debit Core Scheme

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25.09.13ISO 20022 is the New Language of Payments! The Standards Forum Launched the 'ISO 20022 Adoption mApp' Featuring Information on More than 60 ISO 20022 Initiatives Globally

27.08.13On the Difference between Innovation and the Wild West: How to Ensure the Security of Bank Customers´ Funds and Data with Payment Account Access Services

01.08.13Talking about SEPA to Small Businesses? Food for Thought for Public Authorities, Banks and Other Service Providers: “Keep it Simple,” Says the Owner of Dance and Gymnastics School Girlfriends (45 Direct Debit Collections per Month)