Brussels eyes cap on cross-border bank fees


The EU's internal market commissioner Michel Barnier wants more transparency on fees consumers pay when making payments abroad, in a move that could replicate the approach taken with mobile phone operators whose so-called "roaming" fees were capped.

"We will propose legislation on a framework for bank fees," a spokeswoman for Barnier told Reuters earlier this month, saying the Commission's patience had run out after failed attempts by the sector to self-regulate.

"There has been a process for the last year to try and sort this out via self-regulation with the banking industry, but it's not worked," she said.

EU officials said proposals will be tabled "by end 2012-beginning 2013" and could include caps on banking fees similar to the ones imposed on mobile phone operators in the so-called "roaming" regulation.

The European Commission has already pushed legislation on mobile phone roaming, an EU source told EURACTIV, adding that "the door is not closed" to something similar on banking fees.

The roaming regulation, passed in 2007, imposed maximum prices on calls made between European countries, with the objective of eliminating differences with national tariffs. The move attracted furious reactions from telecom operators who labelled the Commission initiative as "populist".

However, a similar approach for banking fees could only be applied "provided you can demonstrate that the prices are excessive in relation to costs," an EU source said.

The Commission could intervene if it can establish that banks are slapping undue charges on cross-border payments, the source went on, stressing that "it must be cross-border" for Brussels to step in.

"A European regulation on retail prices for banking would make no sense," the source explained, saying that pricing of cash withdrawals at ATMs should not be decided at European level.

Deadline not met

Barnier had set a 15 September deadline for banks to come clean on fees they charge customers or face mandatory transparency rules.

"I am disappointed with the response from European banks with the request I put to them a year ago asking for more transparency," Barnier told a news conference in July. "We think the fees should be easy to understand across the board, with comparable fees charged for comparable services. That is not the case today," he said.

If banks did not take his request seriously by 15 September, Barnier had said the Commission would take "legislative action with a view to introducing more standardisation across European markets".

A 2009 report by the European Commission had criticised the price structures of current accounts as "very opaque, making it almost impossible for consumers to know how much they are paying and to compare different offers."

Monique Goyens, Director General of the European consumer group BEUC, called for the Commission to regulate on banking fees: “Across Europe, bank account holders have long been mystified by the lack of transparency when it comes to how much, when and why they pay fees. The lack of clarity makes it enormously difficult to compare the cost of current accounts and prevents consumers shopping for a better deal."

“Let’s call a spade a spade, the banks missed the target by a mile. Self-regulation of the banking sector is just not delivering. We had been working with the industry and the Commission behind the scenes only to witness the failure of another self-regulatory initiative of the banks. We ask the Commission to step in and propose legislation.”

The European Banking Industry Committee (EBIC), an industry group, said its proposal for self-regulation on fee transparency "reflects the commitment of the banking industry to competition and increasing consumer confidence."

EBIC said its proposal aimed to address the Commission's concerns on banking fee transparency, "while at the same time doing justice to the various market conditions of the different member states, representing diverse consumer habits, needs and expectations."

Among the industry commitments were harmonised tools such as uniform terminology for the most common services within each national market and glossaries to explain the terms used. The banks also committed to periodic reporting on fees paid.

"These tools are completely new to the vast majority of banking communities,” said Piia-Noora Kauppi, Chairwoman of EBIC. “We really believe that the solutions we propose are an important milestone for enhanced transparency and comparability of bank accounts. They will make it easier for consumers to better identify, understand and compare bank fees."

A 2009 report by the European Commission criticised the "opaque" fees that banks charge on their customers.

The report described the price structures of current accounts as "very opaque making it almost impossible for consumers to know how much they are paying and to compare different offers."

The report denounced "complex pricing to hidden charges and information that is unclear and incomplete."

  • End 2012-Beginning 2013: European Commission could table regulation on banking fees.

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