The European Union ( ) 'Regulation ( ) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro', commonly referenced as the Single Euro Payments Area ( ) Regulation (see link below), effectively mandates migration to Credit Transfer ( ) and Direct Debit ( ) in the euro area by 1 February 2014. The Regulation provides certainty as to the timing of migration, which is an essential precondition to successful completion of the harmonisation exercise. At the same time, the Regulation - in an attempt to respond to a broad range of requests for flexibility articulated by various parties throughout the legislative process - has introduced several 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. Member States have discretion as to whether they will use any or all of the options to derogate from the 1 February 2014 deadline with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards.
To recap three essential provisions of the Regulation:
- Article 5 details the technical and business requirements that should be observed when carrying out euro credit transfer and direct debit transactions. These requirements relate, among other things, to the use of the IBAN, the BIC and the ISO 20022 XML message standards.
- Articles 6 (1) and (2) stipulate 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. (Article 16 (2) clarifies that non-euro countries will have to make the transition to by 31 October 2016.)
- Article 16 permits individual Member States to extend the deadline for compliance with some of the regulation's provisions; i.e. use of the IBAN, the BIC and the ISO 20022 message standards, to 1 February 2016.
As highlighted in an earlier Newsletter article on the impact of the Regulation on by Dermot Turing and Maria Troullinou (see link below), it is arguable that this attempt at flexibility breeds confusion and risks translating into a prolonged patchwork of national variations. The experience of pioneers on the demand side that have already successfully concluded the migration exercise indicates that the benefits arising from the migration are proportionate to the level of harmonisation achieved (see link to ' Case Studies' below). This is in line with the findings of a study carried out at the request of the European Commission (the Commission) in 2007, which demonstrates that the potential benefits are dependent on swift migration to harmonised payment schemes and technical standards by the demand and supply sides (see link to Capgemini study below).
Article 16 (7) of the Regulation states that Member States must notify the Commission by 1 February 2013 of the derogations that they intend to use. Albeit some Member States have yet to deliver this information, there is now at least more clarity in the market on which exemptions regarding use of the IBAN, the BIC and the ISO 20022 XML message standards will apply where.
IBAN and BIC: possible derogations from the February 2014 deadline by Member States
In accordance with Article 5 (1) (c) of the Regulation, payment service providers ( ) must ensure that (i.e. payers and payees) "use the payment account identifier specified in point (1) (a) of the Annex", namely the IBAN. A payee accepting credit transfers must communicate its IBAN and the BIC of its , "but only where necessary", to its payers (see Article 5 (4)). Similarly, a payer wishing to make a payment by direct debit must communicate its IBAN and the BIC of its , "but only where necessary" (see Article 5 (5)). The Regulation stipulates the timelines for application of the so-called 'IBAN only' rule. Article 5 (7) of the Regulation states: "After 1 February 2014 for national payment transactions and after 1 February 2016 for cross-border payment transactions, shall not require to indicate the BIC of the of a payer or of the of a payee."
Article 16 (6) however, provides that Member States have the option to defer application of the 'IBAN only' rule for national transactions to 1 February 2016. Moreover, the Regulation allows Member States to derogate from Articles 6 (1) and (2) by allowing to provide consumers with conversion services for national payment transactions, enabling them to continue using the national account identifier (Basic Bank Account Number - BBAN) instead of the IBAN until 1 February 2016 (see Article 16 (1)).
ISO 20022 XML message standards: possible derogations from the February 2014 deadline by Member States
Article 2 (17) of the Regulation defines the ISO 20022 XML message standard as "a standard for the development of electronic financial messages as defined by the ISO, encompassing the physical representation of the payment transactions in XML syntax, in accordance with business rules and implementation guidelines of Union-wide schemes for payment transactions falling within the scope of this Regulation." The 'implementation guidelines of Union-wide schemes' referred to in this definition would include, for example, the implementation guidelines published by the with regard to the and Schemes, which are available on the Website (see links to ' Credit Transfer' and ' Direct Debit' included with the ' Migration Tool Kit' below). Article 5 (1) (d) of the Regulation states that "must ensure that where a that is not a consumer or a micro-enterprise, initiates or receives individual credit transfers or individual direct debits which are not transmitted individually, but are bundled together for transmission, the message formats specified in point (1) (b) of the Annex are used." Point (1) (b) of the Annex to the Regulation specifies that such message formats are the ISO 20022 XML message standards.
Article 16 (5) of the Regulation allows Member States to waive the requirement to use the ISO 20022 message formats for that initiate or receive individual credit transfers or direct debits that are bundled together for transmission until 1 February 2016, except in cases where a requests such a service.
European Central Bank makes available fact sheets on national implementation of the Regulation
The Commission indicated its intention to publish a list of derogations applicable at national level once all Member States have notified the Commission. As some Member States are lagging behind the 1 February 2013 notification deadline set out in Article 16 (7) of the Regulation, this list has not yet been posted on the Commission Website. The European Central Bank (ECB) Website however provides country-specific fact sheets on the transitional arrangements chosen by individual Member States; i.e. use of the possible derogations detailed above, based on information currently available (see link below). The ECB Website states: "This overview of 'national facts' will be updated and completed when new information becomes available."
- 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
- European Central Bank Website: Fact Sheets Providing Country-Specific Information Related to Regulation (EU) 260/2012 (the SEPA Regulation)
- Capgemini: SEPA (2007): Potential Benefits at Stake. Researching the Impact of SEPA on the Payments Market and its Stakeholders
- European Commission Website
- EPC Newsletter (April 2012): The Time to Act is Now: Impact of the SEPA Regulation on Payment Service Users
- EPC Newsletter: Case Studies Highlighting Successful SEPA Migration Projects of Bank Customers (Series Started April 2011)
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