In close dialogue with the stakeholder community, the European Payments Council () developed, among other things, the Credit Transfer () and SEPA Direct Debit (SDD) Schemes. It is important to keep in mind that the EPC carries out the scheme management function subject to legal and regulatory conditions defined by the European Union (EU) authorities. This blog revisits, specifically, the role of the European Commission with regard to the evolution of the SCT and SDD Schemes.
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). 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. This means the Commission does not have to seek approval of such amendments from the EU co-legislators. These are the European Parliament and the Council of the EU. (The Council of the EU is the EU institution where the EU Member States’ government representatives sit, i.e. the ministers of each EU Member State with responsibility for a given policy area.)
The EPC Newsletter previously explored the procedure to be followed by the European Commission for determining and amending the technical requirements applicable to euro payment schemes in the article by Dermot Turing and Gail Orton, entitled ‘The New European Decision-Making Landscape: How the European Commission Rules Through Delegated Acts’, published in January 2012. This blog reiterates the relevant principles first reported in January 2012.
Going forward, the responsibility to determine amendments of the technical requirements set out in the Annex to the SEPA Regulation will be assumed by the incoming Juncker Commission. On 10 September 2014, President-elect Jean-Claude Juncker announced the Commissioners-designate and the allocation of responsibilities in his team once it takes office for a five-year term. The next EPC Blog will take a closer look at the portfolios of the new Commissioners as relevant to the European payments market.
Sources cited in this blog are included in the ‘related links’ below.
Recap: appointment of the new European Commission
Following the European Parliament elections in May 2014, Jean-Claude Juncker was proposed as candidate for President of the European Commission by the European Council on 27 June 2014. (The European Council consists of the Heads of State or Government of the EU Member States, together with its President and the President of the European Commission.) The European Council chooses the President of the Commission by “taking into account the latest elections to the European Parliament”. Mr Juncker was elected to become next President of the European Commission in the European Parliament plenary session of 15 July 2014.
The European Council, by common accord with the President-elect, adopts the list of the other persons whom it proposes for appointment as members of the Commission. The right to organise the work of the European Commission, including the allocation of responsibilities, is the prerogative of its President. The next step is for the European Parliament to give its consent to the entire College of Commissioners including the President and the High-Representative of the Union for Foreign Affairs and Security Policy / Vice-President of the European Commission. This is preceded by hearings of the Commissioners-designate in the relevant parliamentary committees. Once the European Parliament has given its consent, the European Council formally appoints the European Commission. (For details on the responsibilities of the European Commission and the process of its appointment, refer to Article 17 of the consolidated version of the Treaty on European Union.)
The European Commission is empowered to make decisions regarding the features of the SCT and SDD Schemes through delegated acts
As mentioned above, the SCT and SDD Schemes have to comply with the technical requirements detailed in Article 5 of, and in the Annex to, the SEPA Regulation. Article 13 of the SEPA Regulation empowers the European Commission to amend the technical requirements set out in the Annex to the Regulation through delegated acts (see also Article 14).
Background on delegated acts
Delegated acts are a new addition to the EU decision-making landscape. They were introduced by the Lisbon Treaty, which came into force in December 2009 and more specifically, by Article 290 of the Treaty on the Functioning of the European Union (TFEU). Whereas European legislation is adopted by the EU co-legislators: the Council of the EU (made up of representatives of the EU governments) and the European Parliament (made up of directly elected members), Article 290 TFEU allows the Council of the EU and Parliament to delegate the power to adopt non-legislative acts to the European Commission (the executive body).
Delegated acts are used when the Council of the EU and European Parliament choose to delegate to the European Commission the power to adopt measures that they could have adopted themselves as an integral part of the legislation, but decided not to in the interests of efficiency. There can be various reasons for this but in the case of the SEPA Regulation, it is because (a) the technical requirements are considered to be precisely that: technical in nature rather than political and (b) delegated acts are more easily amended than legislation that must be passed by the European Parliament and the Council of the EU under the ordinary legislative procedure (formerly known as co-decision, see ‘related links’ below for detailed information on the procedure).
In relation to payments, the possibility of technological and other developments make it likely that the technical requirements contained in the Annex to the SEPA Regulation may need to be updated. The Council of the EU and European Parliament have therefore granted the European Commission the power to do this without the need to trigger another round of negotiations between the EU co-legislators.
The SEPA Regulation therefore grants the European Commission a quasi-legislative role to amend the Annex to the Regulation in order to take account of technical progress and market developments. The framework within which the powers are to be exercised by the European Commission are defined in Articles 13 and 14 of the SEPA Regulation. Power is delegated to the European Commission for a period of five years from the date of entry into force of the SEPA Regulation. (The SEPA Regulation entered into force on 31 March 2012.) This could be extended for a further five years, unless the European Parliament or Council of the EU opposes it three months before the end of the first five year period.
The use of delegated acts is generally still in its infancy and there are institutional question marks about the practical arrangements. A detailed prediction of how the SEPA Regulation delegated power will play out is therefore not possible at this stage. Some broad principles about how the European Commission should proceed have, however, been agreed.
Process for adopting delegated acts
Delegated acts do not need to undergo the full legislative process, but are formally adopted by the College of European Commissioners. A European Commission Communication from December 2009 sets out how Article 290 TFEU should be implemented (the ‘2009 Communication’). For those who follow EU decision-making closely, a similar ‘comitology’ procedure existed prior to the Lisbon Treaty and was known as the ‘regulatory procedure with scrutiny’.
According to the 2009 Communication, the European Commission intends “systematically to consult experts from the national authorities of all the Member States”, except where its preparatory work does not require any new expertise. This consultation will be carried out “in plenty of time, to give the experts an opportunity to make a useful and effective contribution to the Commission”. In financial services, the European Commission has committed to continuing to consult experts appointed by the EU Member States in the preparation of delegated acts, in accordance with established practice. (Representatives from all EU countries are members of the ‘Payments Committee’, an advisory group which helps the Commission with adopting implementing measures of the Payment Services Directive, and other issues linked to payments.) The Commission may also form new expert groups. It is currently unclear what (informal) role the European Banking Authority (EBA) may play in relation to the Annex to the SEPA Regulation. (The EBA is an independent EU authority which works to ensure effective and consistent prudential regulation and supervision across the European banking sector.)
On several occasions, the European Commission has reiterated that it has a lot of autonomy in relation to adopting delegated acts and “experts will have a consultative rather than an institutional role in the decision-making procedure”. However, with Recital 30 of the SEPA Regulation, the European Parliament and Council of the EU require the European Commission to “carry out appropriate and transparent consultation during its preparatory work [on delegated acts], including with the ECB and all relevant stakeholders”.
To date, the European Commission has not made publicly available details as to what extent it will consult SEPA stakeholders not appointed by EU governments when considering amending the technical requirements applicable to SCT and SDD set out in the Annex to the SEPA Regulation.
Scrutinising the European Commission’s use of the delegated power
It is always the legislators, (i.e. the European Parliament and the Council of the EU), who choose to delegate power but once it has been granted, the European Commission has a fair degree of autonomy in exercising that power. There is, however, a role for the Council of the EU and European Parliament in scrutinising its use through a right of revocation and / or a right of objection (within agreed time limits). In order to exercise either of these powers of control, the Council of the EU must act by a qualified majority and the European Parliament, by a majority of its members. In relation to the SEPA Regulation, the exact manner in which these rights are to be exercised is set out in Article 14. In addition, Article 14 stipulates that the European Commission must notify the European Parliament and Council simultaneously “as soon as it adopts a delegated act”.
Stay up-to-date with developments impacting the evolution of the SCT and SDD Schemes
It remains the EPC's objective to ensure that the SEPA payment schemes as set out in the SCT and SDD Rulebooks evolve in response to proven market needs, based on a predictable release schedule. The EPC must, however, clarify that moving forward, it may be required to adapt the rulebook release schedule at short notice to ensure compliance with technical requirements detailed in the Annex to the SEPA Regulation as amended by the Commission (or with any other relevant EU legislation).
On 19 December 2013 the European Central Bank (ECB) announced the launch of the Euro Retail Payments Board (), which will “help foster the development of an integrated, innovative and competitive market for retail payments in euro in the EU”. Going forward, the evolution of the SCT and SDD Schemes, among other things, may also be addressed by the ERPB, chaired by the ECB. For more information, refer to the EPC Blog published on 28 August 2014 included in the ‘related links’ below.
On 19 May 2014 the EPC launched a three-month public consultation on possible modifications to the SCT and SDD Rulebooks. All stakeholders had been invited to provide feedback by 15 August 2014. The next generation rulebooks, (SCT Rulebook version 8.0, Rulebook version 8.0 and SDD Business to Business Rulebook version 6.0), and associated implementation guidelines will be published in November 2014 to take effect in November 2015. In accordance with industry best practice, payment service providers and their suppliers have a one-year lead time to address rulebook updates prior to such updates taking effect.
- Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (the SEPA Regulation)
- European Commission Website: Towards the Juncker Commission
- European Parliament Website: Towards a New Commission – Hearings (29 September through 7 October 2014)
- European Council Website
- European Union Website: EU Treaties
- Consolidated Version of the Treaty on European Union (p. 13) and Consolidated Version of the Treaty on the Functioning of the European Union (p. 47)
- European Commission Communication (2009) to the European Parliament and the Council [of the European Union]: Implementation of Article 290 of the Treaty on the Functioning of the European Union COM(2009)673
- Council of the European Union: Common Understanding on Practical Arrangements for the Use of Delegated Acts (14 April 2011)
- European Parliament Website: Legislative Powers (Ordinary Legislative Procedure)
- European Commission Website: Application of EU Law/Regulations
- EPC Blog (28 August 2014): Learn 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
- EPC News (19 May 2014): EPC Launches Three-month Public Consultation on the Evolution of the SEPA Credit Transfer and SEPA Direct Debit Schemes
- 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.)
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