SEPA Fact Check: The SEPA Benefits Projected by EU Governments, the Eu...

SEPA Fact Check: The SEPA Benefits Projected by EU Governments, the European Parliament, the European Commission and the European Central Bank (1999 - 2013)

SEPA is an EU integration initiative driven by EU governments and the EU institutions. Note: the European Payments Council is not part of the EU institutional framework

29 August 14

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  1. Who invented the Single Euro Payments Area () concept?  is a European Union (EU) integration initiative in the area of payments. With the introduction of the euro currency in 1999, the political drivers of the initiative – EU governments, the European Parliament, the European Commission and the European Central Bank (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.)1

  2. 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 Agenda2. (...) 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 Eurosystem will continue its efforts to foster a general understanding among stakeholders that setting a realistic but ambitious end-date for migration to [ Credit Transfer] and SDD [ Direct Debit] is a necessary step in order to reap the benefits of .”

    Gertrude Tumpel-Gugerell, then Member of the Executive Board of the European Central Bank, 13 October 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 ‘related links’ below). In the related article published in the Newsletter in October 2009, (see ‘related articles in previous issues’ below), 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. Offering both the legacy and the new products in parallel would prove a costly business for payment providers. 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. It would also raise awareness regarding the project.” In response to the public consultation carried out by the European Commission, a “majority of respondents also indicated their preference for a regulation at European level so as to provide a clear signal to market participants that migration was now irreversible.” 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.

    “[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.

    “The success of is very important economically as well as politically. (...) Both the European Parliament (...) and the Council [representing EU Member States] (...) have underlined the importance of achieving rapid migration to .”

    Recital 2, Regulation (EU) No 260/2012 (the SEPA Regulation), adopted by the European Parliament and the Council of the EU in February 2012.

    In June 2010, the Commission services concluded that “there is a need of binding legislation fixing a mandatory date for migration”, (see the Commission Services Working Paper, entitled: ‘ Migration End Date’ included in the ‘related links’ below).

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

     

    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 (national ministers)3, published the proposal for an Regulation to effectively mandate deadlines for migration to . The vast majority of European laws are adopted jointly by the European Parliament and the Council of the under the so-called ordinary legislative procedure. This legislative procedure gives the same weight to the European Parliament and the Council of the in a wide range of areas. A ‘regulation’ adopted by the legislator is a binding legislative act. It must be applied in its entirety across the . For more information on the legislative process, refer to the ‘related links’ below. The European Parliament and the Council of the reached agreement on the 1 February 2014 deadline for migration to applicable in the euro area in December 2011.

    “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 [European Union] 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.

    In February 2012, the legislator, (i.e. the European Parliament and the Council of the representing Member States), formally adopted the ‘Regulation () No 260/2012 establishing technical and business requirements for credit transfers and direct debits’ (the Regulation). The Regulation defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. From 1 February 2014 onwards, organisations making payments in the euro area will have to carry out credit transfer and direct debit transactions in line with the core provisions set out in the Regulation. Effectively, this means that as of 1 February 2014, existing national euro credit transfer and direct debit schemes in the euro area will be replaced by Credit Transfer and Direct Debit. The Regulation is the first legislative act in the context which defines also compliance requirements to be met by payment service users. (Earlier payments legislation adopted between 2001 and 2009 focused on engaging payment service providers in the process. For more information, refer to the Website page, entitled ‘ Legal and Regulatory Framework’ included in the ‘related links below’.)

    “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.

  4. According to the institutions and governments, what are the benefits for payment service users? According to the governments and the  institutions driving the programme, further integration of the euro payments market will result in faster, more efficient payment services for payment service users in a more competitive market.

    “I have yet to meet an informed person who does not see the need and potential of . Clearly, we need to complete euro monetary integration and to create an efficient payments market supporting the single market, which is one of the great European achievements.”

    Charlie McCreevy, then EU Commissioner for Internal Market and Services, January 2009.

    “The advantages of are considerable for the euro area (...) in particular, the project is an important element for the integration of financial services in Europe. The Eurosystem, under its mandate, is committed to supporting the project to promote the smooth operation of payment systems, both as a contribution to the efficiency of the euro area economy and as a way to support continued trust in the euro.”

    Mario Draghi, President of the European Central Bank, 2013.

    “Within the boundaries of the approach of this paper, we also find an overall positive effect on a country’s GDP by 0.02% if instruments were effectively implemented and adopted.”

    European Central Bank Working Paper ‘Retail payments in the real economy’, August 2013.

    The replacement of existing national payment systems by holds a market potential of up to 123 billion euros in benefits over six years for the users of payments services - provided that migration to the new payment instruments takes place rapidly.”

    Study carried out at the request of the European Commission: ‘SEPA: Potential Benefits at Stake. Researching the Impact of SEPA on the Payments Market and its Stakeholders' (Capgemini), 2007.

    “Requiring banks to comply with rules will enable their clients to use a single bank account to make euro payments to and from all countries. (...) Transfers should become cheaper, faster and safer. (...) Businesses could set up cross-border direct debits in euro between any two bank accounts anywhere in the EU, enabling them to bill customers regularly across borders. (...) Businesses could also organise all cross-border euro payments from a single euro account in a country of their choice in order to improve money management and speed up cash flows at lower cost. The new legislation [Regulation (EU) No 260/2012] was adopted [by the European Parliament] in the first reading with 635 votes in favour, 17 against and 31 abstentions.”

    European Parliament press release, 14 February 2012.

    The impact of however, transcends monetary policy and payment services. The European Commission expects the legal and technical harmonisation exercise to streamline business processes by replacing paper-based procedures with standardised electronic solutions such as e-invoicing, for example. These objectives are also set out in the European Commission Communication ‘A Digital Agenda for Europe’, May 2010 (see ‘related links’ below).

  5. Who is responsible to enforce the law which mandates migration to ?  National competent public authorities designated by Member States.

    “[] Member States shall designate as the competent authorities responsible for ensuring compliance with this Regulation public authorities, bodies recognised by national law or public authorities expressly empowered for that purpose by national law, including national central banks.”

    Article 10, Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (the Regulation).

    The list of designated national authorities responsible for ensuring compliance with the Regulation is available on the European Commission Website (see ‘related links’ below). Article 11 (“Penalties”) of the Regulation states: “Member States shall, by 1 February 2013, lay down rules on the penalties applicable to infringements of this Regulation and shall take all measures necessary to ensure that they are implemented.” Article 11 of the Regulation further requires EU Member States to notify the European Commission of those rules and measures by 1 August 2013. The is not aware that the European Commission would have published information on penalties applicable in EU Member States with regard to infringements of the Regulation.

  6. Who is responsible for educating the general public on the objectives? In March 2009, the European Parliament reiterated: “ is (...) a major public policy initiative reinforcing the Economic and Monetary Union.” In the view of the it is the responsibility of the EU governments and the EU institutions responsible for EU financial integration to communicate the objectives to European citizens, businesses and public entities impacted by . This is in line with what was done for the euro introduction.

    “[The Council of the ] calls upon all [] Member States to significantly intensify communication measures primarily at national level to eliminate existing public awareness gaps, especially vis-à-vis SMEs, small public administrations and local authorities; [and] invites euro area National Central Banks, Ministries of Finance and other competent authorities, national banking federations and individual banks to enhance communication activities on migration before summer 2013 through all relevant media channels, e.g. general press, professional press, billboard advertising, radio or TV, where these have not been successfully initiated already.”

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

  7. If I would like to discuss the objectives determined by the governments and the institutions, who should I talk to? If this should be the case and if you are an citizen, the recommends contacting relevant representatives of your national government (finance ministers, for example) acting on behalf of your country in the Council of the representing Member States and / or your representatives in the European Parliament.

    As clarified above, is an integration initiative pursued by the governments and the institutions, i.e. the European Commission, the European Parliament, the Council of the representing Member States and the ECB. These public authorities have defined the objectives as well as the actions to be taken by market participants on both the demand and supply sides of the payments market required, in the view of the authorities, to realise the political vision.

  8. So, what’s the job of the European Payments Council () then? At the request of the authorities, the developed, in close dialogue with the stakeholder community, the harmonised payment schemes for electronic euro credit transfers and euro direct debits which help to realise .

    “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, then Member of the Executive Board of the European Central Bank, 24 September 2001.

    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. 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, the developed, among other things, the Credit Transfer and Direct Debit Schemes. The is an international not-for-profit association which makes all of its deliverables available to download free of charge on the Website.

    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. The is therefore, not in a position to address concerns of any citizen with regard to policies in the area of payments determined by the institutions.

    To learn more about the specific responsibility of the in the process, please refer to the Blog, entitled: ‘Next Generation Credit Transfer and Direct Debit Rulebooks Will be Published in November 2014 to Take Effect in November 2015. Invites Suggestions for Changes by 28 February 2014’ and this dedicated Website page: ‘About ’ (see ‘related links’ below).

Javier Santamaría is the Chair of the .

   

Related links:

European Central Bank SEPA Website

European Commission SEPA Website

Council of the European Union Website

European Commission Communication: The Lisbon Strategy for Growth and Jobs (March 2010)

European Commission Communication: 'A Digital Agenda for Europe'

European Commission: Feedback on the Public Consultation on Possible End-Date(s) for SEPA Migration (September 2009)

European Commission services’ Working Paper ‘SEPA Migration End Date’ (June 2010)

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 (the SEPA Regulation)

European Commission Website: List of Competent Authorities Responsible for Ensuring Compliance with Regulation (EU) No 260/2012 (the SEPA Regulation)

European Parliament/EuroparlTV Website: Video 'How it works: European Laws'

European Parliament Website: Legislative Powers

European Commission Website: Application of EU Law/Regulations

Website: About SEPA - SEPA Legal and Regulatory Framework

Website: About SEPA - The Political Initiators

EPC Blog (October 2013): Next Generation SEPA Credit Transfer and SEPA Direct Debit Rulebooks Will be Published in November 2014 to Take Effect in November 2015. EPC Invites Suggestions for Changes by 28 February 2014

Website: About EPC

The EPC Migration Tool Kit: Get Ready for SEPA by 1.2.2014

     

Related articles in this issue:

SEPA 2014: Businesses and Public Administrations Identify Main Benefits. Case Studies Confirm: Migration to SEPA Generates Tangible Advantages

SEPA 2014 - the European Central Bank Reiterates: "Everybody Has to be Ready on 1 February 2014 or Risk Disruptions in Their Individual Handling of Payment Orders." European Central Bank publishes second SEPA migration report and warns against risks of 'Big Bang' migration scenario

SEPA 2014 - the State of Play (October 2013): a Large Majority of Stakeholders Are Expected to Meet the 1 February 2014 Migration Deadline. Late Movers Must Catch Up. Now. The most significant risk to business operations is non-compliance, i.e. failure to meet the SEPA migration deadline applicable in the euro area mandated by EU law

     

Related articles in previous issues:

Financial Crisis. SEPA can be part of the solution. By Charlie McCreevy. ( Newsletter, Issue 1, January 2009)

Every Road has Got to End Somewhere: the Need for a SEPA Migration End Date. Re-emphasised by the European Central Bank ( Newsletter, Issue 2, April 2009)

Towards a SEPA Migration End Date? Commission services publish feedback on public consultation on possible end date(s) for SEPA migration ( Newsletter, Issue 4, October 2009)

Clarity and Incentives Needed. ECOFIN conclusions of December 2009 on setting an end date for migration to SEPA ( Newsletter, Issue 5, January 2010)

SEPA in the Context of the Financial Crisis. Retail payments business proves to be resilient ( Newsletter, Issue 7, July 2010)

More Europe is Needed, Not Less. Lessons learnt from the financial crisis ( Newsletter, Issue 10, April 2011)

EPC Newsletter: Case Studies Highlighting Successful Migration Projects of Bank Customers



1 The Council of the European Union: http://www.consilium.europa.eu/council.

2 The vision was set out by governments in the Lisbon Agenda, March 2000, which aims to make the more dynamic and competitive. For more information, refer to the ‘related links’ included with this article.

3 European Commission Website: http://ec.europa.eu/atwork/index_en.htm.



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