SEPA Fact Check: the Rationale for SEPA as Defined by the EU Governmen...

SEPA Fact Check: the Rationale for SEPA as Defined by the EU Governments, the European Parliament, the European Commission and the European Central Bank Driving the SEPA Programme and Determining the SEPA Compliance Requirements

29 November 13

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(Note: the European Payments Council is not part of the EU institutional framework.)

To appreciate the views of the European and national public authorities on the Single Euro Payments Area () it must be recalled that is a European Union (EU) payment 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 Member States and the European Central Bank (ECB), since the late 1990s. This blog cites the rationale for as defined by the EU governments and EU institutions driving the programme. The author also clarifies (again): compliance requirements, including mandatory migration deadlines, relevant to that must be met by payment service users and payment service providers in the EU are determined by the EU legislator, i.e. the European Parliament and the Council of the EU representing EU Member States (not by the European Payments Council). With regard to the 1 February 2014 migration deadline applicable in the euro area mandated by EU law, the EU authorities have warned time and again that all market participants must ensure compliance or else risk that payments could be disrupted.

Who invented the concept? is an integration initiative in the area of payments. With the introduction of the euro currency in 1999, the political drivers of the initiative – governments, the European Parliament, the European Commission and the ECB – have focused on the integration of the euro payments market.

“Despite the introduction of the euro, however, there is still a clear gap between the service levels of domestic and cross-border retail payment systems (...). The substantial disparities between domestic and cross-border services ought now to be reduced, and should ultimately disappear. Indeed, the single currency environment argues strongly in favour of a single payment area.”

European Central Bank press release, 13 September 1999.

“The [European] Commission’s political objective is exactly that: a modern Single Payment Area for the entire EU where there is no frontier effect for cross-border payments.”

Frits Bolkestein, then EU Commissioner in charge of the Internal Market and Taxation, 9 November 2000.

“The introduction of the euro as the single currency of the euro area will only be completed when has become a reality, i.e. when consumers, businesses and governments are able to make cashless payments throughout the euro area from a single payment account anywhere in the euro area using a single set of payment instruments as easily, efficiently and safely as they can make payments today in the domestic context.”

Joint statement of the European Commission and the European Central Bank, 4 May 2006.

“[The Council of the ] emphasises again that the full benefits of can only be obtained through the full migration of existing national euro payments transactions.”

Council of the EU representing EU Member States, Council conclusions on SEPA, 2 December 2009. (The Council of the is the institution where the Member States’ government representatives sit, i.e. the ministers of each Member State with responsibility for a given policy area.)

 

Why is there an law that mandates migration to ? During a public consultation carried out by the European Commission in 2009, a majority of respondents echoed requests by the ECB, the European Parliament and the Council of the EU representing EU Member States “for a regulation at European level so as to provide a clear signal to market participants that migration was now irreversible.”

is (...) a major public policy initiative reinforcing the Economic and Monetary Union and the Lisbon Agenda. (...) Whereas no legally binding end-date for migration to instruments has been set, and whereas all parties involved now agree that setting such an end-date is imperative for to be successful. (...) [The European Parliament] calls on the [European] Commission to set a clear, appropriate and binding end-date (...) for migrating to instruments, after which all payments in euro must be made using the standards.”

European Parliament Resolution on the implementation of SEPA, 12 March 2009.

“[The Council of the ] considers that establishing definitive end-dates for (...) migration would provide the clarity and the incentive needed by the market, ensuring that the substantial benefits of are rapidly achieved and that the high costs of running both legacy and products in parallel can be eliminated.”

Council of the EU representing EU Member States, Council conclusions on SEPA, 2 December 2009.

“To ensure the materialisation of benefits, a migration end date by regulation for credit transfer and direct debit is necessary and should be set by the legislator.”

Gertrude Tumpel-Gugerell, then Member of the Executive Board of the European Central Bank, 28 September 2010.

 

In September 2009, the European Commission services published the results of a public consultation on whether and how deadlines should be set for the migration of existing national credit transfers and direct debits to the new harmonised payment schemes (the report is included in the links below). In the related article published in the Newsletter in October 2009, Véronique Margerit, Seconded National Expert with the European Commission’s Directorate General Internal Market and Services, reported: “The results of the public consultation showed that a large majority of respondents support the idea of setting some end-dates to stimulate migration to credit transfers and direct debits. The project holds much promise in terms of improved efficiency, dynamism and competitiveness of the European economy. (...) In addition, setting clear deadlines for the migration to would (...) provide certainty and allow for the appropriate planning of migration, as well as the attribution of the necessary budgets.” The European Payments Council shares the view that an end date for phasing out legacy euro payment schemes for credit transfers and direct debits ensures planning security for all market participants.

Who determines the compliance requirements, including mandatory migration deadlines, relevant to that must be met by payment service users and payment service providers in the ? The legislator, i.e. the European Parliament and the Council of the representing Member States.

“Cross-border payment services should become faster, cheaper and safer for citizens thanks to a deal reached by MEPs [Members of the European Parliament] and [] Member State negotiators (...).The key issue in reaching the deal was to set a legally-binding deadline for banks to ensure that their payment schemes comply with the Regulation. The Parliament’s negotiators insisted on a single deadline for all payments (both credit transfers and direct debits) in order to make the shift to the new system easier to understand for citizens. The agreed deadline is 1 February 2014.”

European Parliament press release, 20 December 2011.

 

On 16 December 2010, the European Commission, which has the right of initiative to propose laws for adoption by the European Parliament and the Council of the EU representing EU Member States, published the proposal for an EU Regulation to effectively mandate deadlines for migration to . In February 2012, the EU legislator, (i.e. the European Parliament and the Council of the EU), formally adopted the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits’ (the Regulation). From 1 February 2014 onwards, payment service users and payment service providers in the euro area will have to carry out euro credit transfer and direct debit transactions in line with the core provisions set out 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). In non euro countries, the deadline will be 31 October 2016.

Avoid the risks of non-compliance. The authorities have warned time and again: “After 1 February 2014 payment service providers will not be allowed to process payment orders that do not comply with the legal requirements as laid down in applicable law.”

“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 .”

Michel Barnier, EU Commissioner for Internal Market and Services, 20 December 2011.

“There is no Plan B: migration to and SDD is required by law, not only for payment service providers, but also for big billers, SMEs, public administrations and consumers. Payment service providers will be obliged to refuse further processing of payments that are not delivered to them in the right technical format after the 1 February 2014 deadline applicable in the euro area. Ignoring the risks of non-compliance, including the hope of a slow response on the part of the responsible authorities, would be a mistake.”

Wiebe Ruttenberg, Head of the Market Integration Division in the Directorate General Payments and Market Infrastructure of the European Central Bank, April 2013.

“[The Council of the ] underlines that the provisions of Regulation () No 260/2012 have to be fully respected by all market participants in euro area Member States; and emphasises that competent authorities should cooperate intensively, on a national and international level, to ensure effective and harmonized compliance with the Regulation. [The Council of the ] underlines that end-users such as ‘big billers’, SMEs and public administrations have their own responsibility to ensure migration. [The Council of the ] stresses that all payment orders which are not submitted in the format requested by Regulation () No 260/2012 after 1 February 2014 may not be processed by all payment service providers in euro area Member States, which otherwise would be sanctioned.”

Council of the EU representing EU Member States, SEPA conclusions, 14 May 2013.

“The migration requirements set by law have to be fully respected without exception. While payment service providers play a central and crucial role in migration to , end-users such as ‘big billers’, public administrations and in particular SMEs, have their own responsibility to ensure that they are able to send and receive payments in euro also from 1 February 2014 onwards.”

Statement adopted by the SEPA Council, 23 September 2013. (The SEPA Council, which is chaired by the European Central Bank and the European Commission, brings together representatives of both the demand and supply sides of the payments market).

“We are not going to change the end date.”

Benoît Cœuré, Member of the Executive Board of the European Central Bank, September 2013.

“I have said this before and will repeat it: everybody has to be ready on 1 February 2014 or risk disruptions in their individual handling of payment orders,” said Benoît Cœuré, member of the Executive Board of the ECB, pointing out that this is also the position of the European Union Council [representing EU Member States] and the European Commission. “Since our first migration report [in March 2013], we have been emphasising the fact that both payments providers and users are responsible for being sufficiently prepared. And our message to them is still the same: don’t leave it to the last minute. (...) Payment orders that do not comply with the legal requirements as laid down in the Migration End-date Regulation will not be allowed to be processed by payment service providers after 1 February 2014.”

European Central Bank press release, 24 October 2013.

 

Migration to is mandated by law (not by the European Payments Council)

As outlined above, compliance requirements that must be met by payment service users and payment service providers in the are determined by the legislator, i.e. the European Parliament and the Council of the representing Member States – not by the European Payments Council (). The is not an legislative body. More generally, the is not part of the institutional framework. The is one stakeholder group among many impacted by the policy-maker-driven programme. The is not responsible for the overall management of the process. When the governments and institutions first launched the process in the late 1990s, the authorities expected the banking industry to contribute the resources required to develop European instruments for electronic euro payments.

“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. We therefore share the view that pressure should be kept on the banking industry to obtain the necessary improvements.”

Tommaso Padoa-Schioppa, Member of the Executive Board of the European Central Bank, 24 September 2001.

 

In response to these expectations repeatedly articulated by the authorities, the European banking sector created the in 2002. In close dialogue with the stakeholder community and as requested by the authorities, the developed, among other things, the and SDD Schemes. The is an international not-for-profit association which makes all of its deliverables available to download free of charge on the Website. To learn more about the specific responsibility of the in the process, please refer to the dedicated Website page: ‘About ’ (see links below).

Related links:



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