On 24 April 2009 the European Parliament approved a proposal modifying and extending the provisions of Regulation 2560/2001 on cross-border payments in euro, whereby banks are not permitted to impose different charges for domestic and cross-border payments or ATM withdrawals in the EU. Main changes include: the extension of price parity requirements to direct debits; rules on multilateral interchange fees for direct debits and mandatory reachabillity for Direct Debit collections in the euro area from 1 November 2010 onwards. Missing out on a golden opportunity, the European legislator failed to include provisions on phasing out balance of payments reporting requirements. These reporting requirements, however, violate the principles governing the realisation of SEPA. The revised Regulation will be directly applicable in all Member States as of 1 November 2009. Séverine Anciberro provides the details.
Revised Regulation 2560/2001: impact on pricing and reachability
Regulation 2560/2001 on cross-border payments in euro was adopted in December 2001. Its provisions prohibit banks to impose different charges for domestic and cross-border payments or ATM withdrawals in the EU-27. Regulation 2560/2001 has also generally been understood as a turning point in the financial integration policy of the European legislator: beyond its formal stipulations, the Regulation at the time of its inception was also clearly intended to shock the banking sector into stepping up its efforts to achieve the Single Euro Payments Area ().
The revised version of the Regulation approved by the European Parliament on 24 April 2009 introduces additional provisions which - in the eyes of the regulator - further promote EU financial integration in general and SEPA implementation in particular. Whether legislative intervention to this extent is desirable from anybody's point of view may be debatable; the fact of the matter is, at any rate, that the revised Regulation will have significant impact due to the introduction of the following provisions: (1) the price parity requirements are extended to direct debits; (2) the setting out of clear rules for transaction-based multilateral interchange fees until November 2012; (3) banks in the euro area are mandated to become reachable for SEPA Direct Debit collections from November 2010.
Pending the expected confirmation of the proposal by the Council in May 2009 the revised Regulation will be applicable in all Member States from 1 November 2009 onwards.
Extension of the price parity requirement to direct debits
The principle of price parity with regard to domestic and cross-border transactions so far only applied to credit transfers and card transactions. The revised Regulation extends the price parity to direct debits executed under existing national direct debit schemes and cross-border direct debits executed under the new SEPA scheme. Extending the price parity in this manner is based on the flawed assumption of legacy direct debit services and SEPA Direct Debit services being comparable which in fact they are not. Instead, the price offering should have been left to the competitive space, bearing in mind that it is in the interest of each payments services provider to attract customers to the new SEPA instrument.
Rules for charging multilateral interchange fees (MIF) for direct debits
Article 5a of the revised Regulation provides that:"In the absence of any bilateral agreement between the payment service providers of the payee and of the payer, a multilateral interchange fee of 0.088 EUR, payable by the payment service provider of the payee to the payment service provider of the payer, shall apply for each cross border direct debit transaction, executed before 1 November 2012, unless a lower multilateral interchange fee has been agreed upon between the payment service providers concerned". Article 5b of the revised Regulation also regulates interchange fees for national direct debit transactions.
The recognises that the principles outlined in a joint statement of the European Commission and the European Central Bank of 24 March 2009 as regards multilateral inter-bank fee arrangement for SEPA Direct Debit as of November 2012 will affect the SEPA banking communities differently due to the fact that banks' existing direct debit business models vary from country to country*. This means that some communities are confronted with the obligation to adapt their current direct debit business model significantly as of November 2012.
Establishment of mandatory availability ("reachability") of payment accounts for direct debit payments across the European Union
The use of direct debit is conditioned to the reachability of payment accounts across the European Union as of November 2010. For Member States which have not yet adopted the euro, the rules on mandatory availability will apply a year after their entry into the euro area, but no later than 2014. In other words, Regulation 2560/2001 now mandates banks to become reachable for SEPA Direct Debits as detailed above.
Failure to repeal balance of payment reporting requirements
The proposal regarding revision of Regulation 2560/2001 first published by the European Commission on 15 October 2008 included a sunset clause stipulating that "with effect from 1 January 2012 at the latest, member states shall remove settlement-based national reporting obligations on payment service providers for balance of payments statistics." In line with the Commission's proposal and in view of the objective to establish a single payments market (SEPA) with harmonised legislation and practices across Europe, the payments industry and its users strongly supported inclusion of this sunset clause in the revised legislation.
Due to opposition from a blocking minority of Member States (Italy, Spain, Portugal, Greece, Bulgaria and Rumania), however, this sunset clause was removed from the final legislative text. The failure of the European policy maker to commit to the removal of balance of payments reporting obligations in the foreseeable future violates the principles governing the realisation of SEPA and undermines the aim of establishing a level playing field as regards the provision of payments services. The difference in reporting requirements imposed on banks in EU Member States create different cost structures for payments business: the costs incurred as a result of complying with such requirements are borne in full by banks which face heavy competition constraints as a result.
It is particularly regrettable that the failure to set an end date for the abolition of these reporting requirements stems primarily from the refusal of National Central Banks in the above mentioned Member States to reform outdated methodologies to gather data used to compile national balance of payment statistics. This attitude is unacceptable considering that (a) the ECB / Eurosystem claim to be a principal catalyst of SEPA and (b) the Regulator including the ECB / Eurosystem has no qualms about requiring payments services providers and their customers to implement massive changes in order to achieve the integration of euro payments markets.
Then again - what's new?
* The joint statement of the European Commission and of the European Central Bank of 24 March 2009 is available at http://www.ecb.int/press/pr/date/2009/html/pr090324_1.en.html
Séverine Anciberro is an adviser in the Retail Financial Services/Legal and Social Affairs department of the European Banking Federation.
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