Recap: the role of the European Payments Council () in the Single Euro Payments Area () process
As frequently pointed out in this newsletter, SEPA is a European Union (EU) integration initiative pursued by the EU governments and the EU institutions, i.e. the European Commission, the European Parliament, the Council of the EU representing EU governments and the European Central Bank (ECB). SEPA compliance requirements that must be met by payment service users and providers are determined by the EU institutions in accordance with their specific competences.
When the EU governments and EU institutions first launched the SEPA process in the late 1990s, the EU authorities expected the banking industry to contribute the resources required to develop European instruments for electronic euro payments. In 2001, the ECB reiterated: “Like the [European] Commission and the [European] Parliament, the ECB is fully committed to the objective of creating a single payment area for the euro (...) pressure should be kept on the banking industry to obtain the necessary improvements.”1
In response to these expectations repeatedly articulated by the EU authorities, the European banking2 sector created the European Payments Council (EPC) in 2002. The EPC has come through on its commitment to deliver the SEPA payment schemes which help to realise the political SEPA vision. In close dialogue with the stakeholder community, the EPC developed, among other things, the SEPA Credit Transfer () and SEPA Direct Debit (SDD) Schemes. The EPC launched the SCT Scheme in January 2008 and the and SDD Business to Business (B2B) Schemes in November 2009. The vast majority of payment service providers () in SEPA started rolling out services based on the SCT and SDD Schemes on a voluntary basis long before the EU lawmaker adopted the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’3 (the SEPA Regulation), which effectively defines mandatory deadlines for migration to SCT and SDD.
It is important to note that the EPC is not part of the EU institutional framework. The EPC has, therefore, no role in the adoption of any EU laws or other regulatory initiatives establishing SEPA compliance requirements.
For more information on the role of specific actors involved in the SEPA process at the European level and their interaction, refer to the EPC infographic ‘SEPA at a Glance’ included in the ‘related links’ below.
The EPC confirms its purpose: support and promote European payments integration and development, notably SEPA
The purpose of the EPC is to support and promote European payments integration and development, notably SEPA. Consequently, the EPC remains committed to contribute to safe, reliable, efficient, convenient, economically balanced and sustainable payments, which meet the needs of payment service users and support the goals of competitiveness and innovation in an integrated European economy.
The EPC pursues this purpose through the development and management of pan-European payment schemes4 and the formulation of positions and proposals on European payment issues in constant dialogue with other stakeholders and regulators at the European level; taking a strategic and holistic perspective. The EPC offers one focal point and voice for the PSPs’ sector on all European payment issues, driven by a single vision.
Adjustments to the EPC structure: enhanced governance and stakeholder involvement contribute to ensuring that the EPC meets its purpose, taking into consideration the agreed scope of EPC activities
With migration to harmonised SEPA payment schemes in the euro area complete5, the EPC resolved in October 2014 to adapt its current structure to further enhance governance and stakeholder involvement.
The EPC points out that the adjustments are of an evolutionary rather than a revolutionary nature. They contribute to ensuring that the EPC meets its purpose, taking into consideration the agreed scope of EPC activities:
- The primary objective of this process is to ensure that the EPC continues to be best equipped to carry out its main function, i.e. to manage the administration and evolution of the SCT and SDD Schemes, in an efficient and transparent manner.
- The EPC also develops positions on behalf of EPC members, representing PSPs, vis-à-vis the EU institutions, public authorities, international organisations, and the general public on European payment issues as well as on policies, legislation and regulations impacting payments in the EU. The EU authorities driving the SEPA process have clarified that migration to harmonised SEPA payment schemes does not conclude this EU integration project. SEPA is “more than just credit transfers and direct debits. It is also about card payments and might also cover internet and mobile payments. It will contribute to the further harmonisation of retail payments in the internal market”, former Vice-President of the European Commission Michel Barnier stated on 1 August 2014. Consequently, further regulatory action intended to bring about ‘SEPA 2.0’ is now in the pipeline. (For more information, refer to the EPC Newsletter article, entitled ‘SEPA 2.0: an Overview of Regulatory Action Now in the Pipeline Impacting the European Payments Market Going Forward’ included in the ‘related articles in previous issues’ below.)
This article provides an overview of key features of the new organisational structure of the EPC and introduces new bodies to be integrated into the EPC governance model.
The legal form of the EPC remains unchanged: the EPC is an international not-for-profit association
The EPC remains an international not-for-profit association governed by the provisions of Title III of the law of 27 June 1921 of the Kingdom of Belgium on non-profit associations, international non-profit associations and foundations.
The EPC makes all of its deliverables, including the SEPA Scheme Rulebooks and adjacent documentation, available to download free of charge on the EPC Website. In this context, it is important to keep in mind that the particular payment products and services – based on a particular payment scheme – offered to the customer are developed by individual PSPs operating in a competitive environment. The development of payment products based on the SEPA payment schemes including all product-related features is outside the scope of the EPC. The EPC does not supply technology, goods or services.
Membership of the EPC: the EPC represent PSPs
EPC members represent organisations of all sizes and sectors of the European PSP sector. Changes to the EPC governance model have no impact on the membership of entities that are currently members of the EPC, i.e. these entities will continue to be members of the EPC once the revised EPC Charter takes effect.
EPC membership will be open to any legal entity which has received an authorisation from a competent authority of the European Economic Area and is regulated as a ‘payment service provider’ as defined in the Payment Services Directive (including in its future amended version currently under review by the EU co-legislators)6; or has received an equivalent authorisation from an equivalent competent authority established in another country or territory included within the geographical scope of the SEPA Schemes7. EPC membership is also open to a legal entity representing and, directly or indirectly, having PSPs as members, and being established in a country or territory included in the geographical scope of the SEPA Schemes, (i.e. banking associations).
Representation of EPC members within the EPC association: the EPC establishes the new General Assembly and the new EPC Board
To date, the EPC Plenary, representing all EPC members and supported by the EPC Coordination Committee, serves as the main EPC decision-making body. The Plenary and Coordination Committee will cease to exist once the new General Assembly and the new EPC Board become operational.
The General Assembly is composed of all EPC members. It is supported in its role by, among other EPC bodies, the new EPC Board. The General Assembly elects the members of the EPC Board.
The members of the EPC Board are representatives from EPC members. The EPC Board, which reports to the General Assembly, has all powers necessary to accomplish the purpose of the EPC, except for the powers that are specifically granted to other bodies of the EPC (e.g. the General Assembly) by law or the EPC Charter. The EPC Board is supported by working groups, support groups and the task forces that it may establish and revoke from time to time.
The EPC Chair and Vice-Chair, respectively, serve as the Chair and Vice-Chair of the General Assembly and the EPC Board.
The evolution of the SEPA payment schemes in a multi-stakeholder environment: recap of who does what at the European level
As mentioned above, when the EU governments and EU institutions first launched the SEPA process in the late 1990s, they pursued the further integration of the market for electronic euro payments with a clear division of labor in mind: while the EU authorities focused on creating the legal and regulatory conditions facilitating the transition of millions of payment service users and thousands of providers to harmonised SEPA payment schemes, they requested the banking industry to contribute the expertise and resources required to develop SEPA payment schemes for electronic euro credit transfers and direct debits. This approach reflected practices established in the pre-SEPA era at domestic level where national banking communities were primarily responsible for managing local payment schemes.
Fast forward to the present, the main change with regard to the development of harmonised SEPA solutions outside the competitive environment is this: today, the authorities expect that related efforts are the result of multi-stakeholder endeavours involving, essentially, representatives of all impacted parties on the demand, supply and regulatory sides. With regard to the further evolution of, specifically, the SCT and SDD Schemes going forward, it is therefore, important to keep in mind the roles performed by various actors, (including, but not limited to the EPC), at the European level.
In particular, the European Commission and the ECB, respectively, have established several dedicated bodies to facilitate the dialogue on the SEPA process with market participants representing various stakeholder groups. The dialogue taking place within these bodies also addresses – and, consequently, impacts – the evolution of the SCT and SDD Schemes managed by the EPC.
The role of the European Commission and the EU co-legislators: the SCT and SDD Schemes must comply with the relevant requirements set out in Article 5 of, and in the Annex to, the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation) adopted by the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments, in February 2012. Article 13 of the SEPA Regulation empowers the European Commission to amend the technical requirements detailed in the Annex to the Regulation through delegated acts. (For detailed information, refer to the EPC Blog, entitled ‘The New European Commission is Expected to Take Office on 1 November 2014. A Recap of the Role of the European Commission in the Evolution of SEPA Credit Transfer and SEPA Direct Debit’ included in the ‘related links’ below).
The role of the ECB: in 2010, the European Commission together with the ECB established the SEPA Council, which brought together representatives from both the demand and supply sides with a view to promoting the realisation of an integrated euro retail payments market by ensuring high level stakeholder involvement. On 19 December 2013, the ECB announced the launch of the Euro Retail Payments Board (), which replaces the SEPA Council. The ERPB, chaired by the ECB, will “help foster the development of an integrated, innovative and competitive market for retail payments in euro in the EU”. ERPB members represent the demand and supply sides of the payments market. (The EPC is a member of the ERPB.) EU national central banks also participate in the ERPB. The Commission acts as an observer. (For detailed information, refer to the ‘related links’ below and the EPC Newsletter article, entitled ‘Learn More About Work Items Related to SEPA Credit Transfer and SEPA Direct Debit Addressed by the New Euro Retail Payments Board (ERPB) Chaired by the European Central Bank’ included in the ‘related articles in this edition’ below.)
The role of the EPC: the SEPA payment schemes, as set out in the SCT and SDD Rulebooks, continue to evolve based on a transparent change management process adhered to by the EPC which provides any interested party with the opportunity to participate. This evolution reflects changes in market needs and updates of technical standards developed by international standards bodies, such as the International Organization for Standardization. As mentioned above, the EPC carries out the scheme management function subject to legal and regulatory conditions defined by the EU authorities. (For detailed information, refer also to the ‘related articles’ in this and previous EPC Newsletter editions listed below.)
SCT and SDD scheme management within the EPC going forward
The EPC resolved to adapt its structure with regard to scheme management to further enhance the involvement of stakeholders and to ensure that the administration and evolution of the schemes continue to be carried out in an efficient and transparent manner. With these objectives in mind, the following new bodies are created:
The Scheme Participants Assembly is composed of PSPs that have formally adhered to the SCT and SDD Schemes. It endorses the nomination of candidates for the scheme participants’ seats on the Scheme Management Board. The Scheme Participants Assembly receives regular information from the Scheme Management Board about its activity.
The Scheme Management Board will be responsible for performing the following two functions of SEPA scheme management upon delegation from the EPC Board:
- The first function is the administration of the SCT and SDD Schemes. This includes approval of applications from PSPs to adhere to the schemes and the process of ensuring compliance with the rules as laid down in the SCT and SDD Rulebooks, i.e. handling of complaints, conciliation cases and appeals. In carrying out this function, the Scheme Management Board will be supported by the Compliance and Adherence Committee and the Appeals Committee.
- The second function involves managing the development and evolution of the SCT and SDD Schemes. In carrying out this function, the Scheme Management Board will be supported by the Scheme Evolution and Maintenance Working Group.
Details on the structure of the Scheme Adherents Participants Assembly, the Scheme Management Board, the Compliance and Adherence Committee and the Appeals Committee as well as their internal organisation, rules and processes are set out in sections 2 and 3 of the draft new SEPA Scheme Management Internal Rules (subject to public consultation) included in the ‘related links’ below. Details on the Scheme Evolution and Maintenance Working Group are described in section 4 of the draft new SEPA Scheme Management Internal Rules.
The role of independent members of the new scheme management governance bodies
Ensuring that the SCT and SDD Schemes continue to meet market needs requires identifying those elements and features catering to the vast majority of stakeholders across - today - 34 SEPA countries.
Dialogue with stakeholders across SEPA frequently demonstrates that the requirements of bank customers, with regard to the SEPA payment schemes, differ widely across and within the various customer segments and SEPA countries. As regards the latter, it has to also be kept in mind that 98 percent of all retail payments are made within national borders. Payment service users are not only divided into payers and payees, (whose payment needs are different). Bank customers encompass a wide range of interest groups including consumers, public administrations, corporates and small and medium-sized enterprises (SMEs). Corporates and SMEs may be active domestically, regionally or globally. In a multi-country environment such as SEPA, even within a specific customer segment, there exist very different schools of thought as to which specific features should be included in a payment scheme or not.
In line with governance best practice and to ensure proper consideration of the interests of all stakeholders, i.e. payment service users and providers, a number of seats on the Scheme Management Board, the Compliance and Adherence Committee and the Appeals Committee, respectively, will be held by independent members. ‘Independent’ means that candidates should not be employed or be otherwise affiliated with a scheme participant, i.e. a PSP that has formally adhered to the SCT and SDD Schemes; a PSP community represented in the EPC; other service providers or a payment services user group or user association. (For further details, refer to the profile of an independent member of the Scheme Management Board, the Compliance and Adherence Committee and the Appeals Committee included in the ‘related links’ below.)
EPC calls for independent candidates seeking appointment to one of the following newly to be established bodies: the Scheme Management Board, the Compliance and Adherence Committee and the Appeals Committee. Applications are invited by 12 November 2014
On 16 October 2014, the EPC launched a call for independent candidates seeking appointment to one of the following newly to be established scheme management governance bodies, effective first quarter of 2015:
- Scheme Management Board: the vacancies are for the three seats available to independent members (including the Chair of the Scheme Management Board).
- Compliance and Adherence Committee: the vacancies are for the two seats available to independent members.
- Appeals Committee: the vacancies are for the two seats available to independent members.
For details on the application process, refer to the ‘EPC News’ of 16 October 2014 included in the ‘related links’ below. Applications are invited by 12 November 2014.
Dialogue with payment service users and technology and service providers
Last but not least, the evolution of the SCT and SDD Schemes relies on close dialogue of the EPC with the representatives of the demand side of the payments market as well as with providers developing technical SEPA solutions which help the market to fully reap the SEPA benefits. The EPC therefore, plans to constitute the following two new bodies:
Scheme End-User Forum: dialogue with representatives of payment service users to date takes place in the EPC’s Customer Stakeholder Forum founded in 2007. This cooperation will be further enhanced and formalised with the creation of the new Scheme End-User Forum.
Scheme Technical Forum: to strengthen the dialogue between the EPC as the SCT and SDD scheme manager and the SEPA-compliant clearing and settlement mechanisms (CSMs)8, the ‘EPC Clearing and Settlement Forum’ was created in 2011. The scope of the new Scheme Technical Forum will be expanded to allow the dialogue with CSMs as well as representatives of technology and service providers.
Details on the Scheme End-User Forum and the Scheme Technical Forum are described in section 4.4 of the draft new SEPA Scheme Management Internal Rules. The Scheme End-User Forum and Scheme Technical Forum are expected to be constituted in the course of the first half of 2015 subject to amended SEPA Scheme Management Internal Rules to take effect following public consultation.
SEPA remains a work in progress: the EPC is ready and looks forward to making the next steps in the SEPA process in close dialogue with all stakeholders
The new EPC governance model will become operational in the first quarter of 2015 once the revised EPC Charter takes effect subject to procedures to be observed under Belgian law and the new SEPA Scheme Management Internal Rules come into force.
The EPC has emphasised that completing migration to harmonised SEPA payment schemes and technical standards in the euro area, as mandated by EU law, reflects an important achievement. Meeting this milestone has been a tremendous effort for everybody on the demand and supply sides. The PSP industry is proud to have contributed, together with all other stakeholders, to realising this unique integration project launched by the EU institutions and EU governments with the introduction of the euro currency in 1999.
This said, SEPA remains a work in progress. The EPC is ready and looks forward to making the next steps in the SEPA process in close dialogue with all stakeholders.
Javier Santamaría is the Chair of the EPC.
EPC News (16 October 2014): EPC calls for independent candidates seeking appointment to one of the following newly to be established bodies: the Scheme Management Board, the Compliance and Adherence Committee and the Appeals Committee. Applications are invited by 12 November 2014
EPC Website: SEPA at a Glance – the Infographic (this infographic provides an overview of the actors involved in the SEPA process at the European level and their interaction)
EPC Blog (30 September 2014): The New European Commission is Expected to Take Office on 1 November 2014. A Recap of the Role of the European Commission in the Evolution of SEPA Credit Transfer and SEPA Direct Debit
European Central Bank Website: Governance (includes detailed information on the Euro Retail Payments Board (ERPB) and related documentation)
Related articles in this issue:
SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, Respectively. Based on feedback received during the 2014 public consultation on changes to the rulebooks, the EPC resolved to update the release schedule applicable to the next rulebooks generations
Learn More About Work Items Related to SEPA Credit Transfer and SEPA Direct Debit Addressed by the New Euro Retail Payments Board (ERPB) Chaired by the European Central Bank. The ERPB represents the demand and supply sides of the payments market with participation of national central banks
The New European Commission: a Closer Look at President Juncker’s Vision for the EU Internal Market and Economic and Monetary Union. The European Commission will continue to play a principal role in the SEPA process going forward
Related articles in previous issue:
SEPA 2.0: an Overview of Regulatory Action Now in the Pipeline Impacting the European Payments Market Going Forward. The European authorities have clarified that migration to harmonised SEPA payment schemes and technical standards does not conclude this EU integration project (EPC Newsletter, Issue 23, July 2014)
Next Generation SCT and SDD Rulebooks: Three-Month Public Consultation Starts on 19 May 2014. All stakeholders are invited to provide feedback on possible modifications to the SCT and SDD Rulebooks (EPC Newsletter, Issue 22, April 2014)
Join the Debate on the Further Evolution of the SCT and SDD Schemes: Less Flexibility, More Harmonisation? An overview of the options, variations, exceptions and exemptions possible in SEPA today (EPC Newsletter, Issue 22, April 2014)
1 Keynote address of Mr. Tommaso Padoa-Schioppa, Member of the Executive Board of the European Central Bank, at the EU Commission conference Payments in euro in the Internal Market Brussels, 24 September 2001 http://www.ecb.europa.eu/press/key/date/2001/html/sp010924.en.html.
2 The term ‘banking’ is used in a non-discriminatory fashion and includes payment institutions.
3 In February 2012, the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments, adopted the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’. It 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 and SEPA Direct Debit.
4 For more information, refer to the EPC Website page ‘What is a Payment Scheme?’ http://www.europeanpaymentscouncil.eu/index.cfm/sepa-customers/what-is-a-payment-scheme/.
5 It is important to keep in mind that, following 1 August 2014, countries in- and outside of the euro area ensure that they are ready to meet SEPA compliance requirements applicable in 2016 mandated by EU law. 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 have discretion as to whether they will 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. Niche products, which have been granted an exemption: the SEPA Regulation, in particular, stipulates that credit transfer and direct debit transactions with a cumulative market share of less than 10 percent in an EU Member State must comply with the provisions set out in this legislative act only by 1 February 2016. Non-euro countries will have to comply with the SEPA Regulation by 31 October 2016. For more information, refer to the EPC Blog, entitled ‘1 August 2014 Does Not Mark the End of the Migration Process. Get Ready for SEPA 2016. Act Now’ http://www.europeanpaymentscouncil.eu/index.cfm/blog/1-august-2014-does-not-mark-the-end-of-the-migration-process-get-ready-for-sepa-2016-act-now/.
6 The European Commission published its proposal for a revised Payment Services Directive () on 24 July 2013. This proposal remains under review by the European Union (EU) co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments. The formal title of the proposed PSD2 is “Proposal for a Directive of the European Parliament and of the Council [of the EU] on payment services in the internal market and amending Directives 2002/65/EC, 2013/36/EU and 2009/110/EC and repealing Directive 2007/64/EC”. For more information, refer to the ‘Legal and Regulatory Issues’ section in this newsletter: http://www.europeanpaymentscouncil.eu/index.cfm/newsletter/archive/?category=7.
7 The jurisdictional scope of the SEPA Schemes currently consists of the 28 EU Member States plus Iceland, Norway, Liechtenstein, Switzerland, Monaco and San Marino http://www.europeanpaymentscouncil.eu/index.cfm/knowledge-bank/epc-documents/epc-list-of-sepa-scheme-countries/.
8 Clearing and settlement mechanisms (CSMs) enable the exchange of funds (money) and messages between two payment service providers (PSPs) executing a payment transaction. Services offered by competing CSMs, based on the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes, are governed by market forces and are outside the scope of the European Payments Council (EPC).
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