Late Movers: Learn to Love SEPA. There are Ten Months Left to Meet the...

Late Movers: Learn to Love SEPA. There are Ten Months Left to Meet the 1 February 2014 Migration Deadline Mandated by European Union Law

25 October 13

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In December 2011, the European Commission (the Commission) commented on the agreement by the European Union (EU) legislator on the 1 February 2014 deadline for migration to the Single Euro Payments Area (): "Today's agreement by the European Parliament and the Council [representing the 27 EU Member States] represents a significant step towards a truly integrated market for electronic retail payments in euro. (...) The reasonable transition periods applied will allow customers and banks to get used to the adjustments in domestic payment transactions, provide legal certainty, avoid the cost of operating dual payments systems and bring forward the substantial future benefits of ." (See link to the Commission's press release of 20 December 2011 below). More than one year later, some commentators contributing to the debate continue to entertain the following - erroneous - ideas: (1) Meeting the February 2014 deadline established by the EU legislator would be a matter of choice or convenience for payment service users such as corporates, small and medium-sized enterprises and public administrations making payments in the euro area. (2) The request to postpone this deadline is directed at parties (including the ) not vested with any powers to adopt or amend EU law.

The fact of the matter is: the only party empowered to change the 1 February 2014 deadline is the legislator; i.e. the European Parliament and the Council of the representing Member States. The legislator has never indicated that it would consider such a motion. Consequently, there is only Plan A: get ready for in the euro area within the next ten months.

A brief recap on the principles governing the legislative process

The vast majority of European laws are adopted jointly by the European Parliament and the Council of the EU (made up of representatives of the 27 EU Member States) under the so-called ordinary legislative procedure. This legislative procedure gives the same weight to the European Parliament and the Council of the EU on a wide range of areas (see link to the European Parliament Website below). A 'regulation' adopted by the EU legislator is a binding legislative act. It must be applied in its entirety across the EU (see link to the EU Website below).

The European Parliament adopted the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the Regulation) on 14 February 2012. The Council of the EU representing EU Member States adopted this legislative act on 28 February 2012. The Regulation was published in the Official Journal of the EU on 30 March 2012 and came into force on 31 March 2012. Article 6 (1) and (2) of the Regulation mandates that credit transfers and direct debits shall be carried out in accordance with the relevant requirements set out in Article 5 and in the Annex to the Regulation by 1 February 2014, subject to certain limited exemptions mentioned in the Regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes in the euro area will be replaced by Credit Transfer () and Direct Debit (SDD). As mentioned above, there are no indications whatsoever that the EU legislator would consider changing Article 6 - the provision which defines the compliance date applicable in the euro area - of the Regulation. Postponement of the 1 February 2014 deadline would counteract the expectations articulated by the lawmakers that meeting that date will generate significant benefits for consumers and businesses and contribute to further strengthening the common currency (see the link to the Blog of 23 August 2012 below for details).

Requests to change the 1 February 2014 deadline mandated by law are occasionally, albeit erroneously, directed at the . To give just one example: in his article, entitled: ' 2014 unrealistic - opinion', published in Asiamoney Plus on 22 March 2013, Chien Mi Wong states that the "should give corporates, banks and public administrations more time to comply with the upcoming Regulation as underlying complexities continue to hinder its adoption. (...) In order to promote a smoother transition to , the needs to set proper guidelines and staggered deadlines to when public administrations across the region should standardise their processes. And once this is achieved, the can move to setting a deadline for the financial institutions to adopt the system ahead of corporates."

It has to be noted that the is an international non-profit association that serves as the coordination and decision-making body of the European payments industry. The develops, among other things, the and SDD Schemes which help to realise the integrated euro payments market (see the link to 'About ' below.) The is not an EU legislative body. More generally, the is not part of the EU institutional framework. The is therefore not in a position to change the 1 February 2014 deadline mandated with EU law. It is the view of the that the legally binding migration deadline provides planning security to all market participants and should not be postponed.

National authorities responsible for enforcing the 1 February 2014 deadline must step up their communication efforts

On 21 March 2013 the European Central Bank (ECB) published its first Migration Report (see link below). According to the related ECB press release, the report "shows that most corporations have already completed the planning phase and know what will mean for them in practical terms. However, when it comes to the actual implementation, a number of companies have adopted very late internal deadlines, even as far as to the end of 2013. (...) More worryingly, Small and Medium Enterprises' (SMEs) and local public administrations' awareness of is still fragmented and the level of preparedness is rather poor." Article 10 of the 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 see the list of designated authorities). The calls on public authorities in the euro area responsible for enforcing the Regulation to significantly step up their communication efforts, with particular regard to SMEs and public administrations on the legal obligation to meet the 1 February 2014 deadline. These communication efforts should indeed be supported by the political drivers of the programme - such as EU governments - promoting EU integration. As demonstrated with the ECB Migration Report, this is a matter of urgency.

Late movers: learn to love

Organisations now working towards achieving compliance with the Regulation are invited to take advantage of the numerous resources offered by the banking industry and other service providers to support market participants during the transition. Relevant information is also made available with 'The Migration Tool Kit'. In addition, the offers best practice identified by early movers on the demand side who successfully completed migration to and SDD (see links below).

Related links:

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