Commission will not rule out regulation on single payments area

The Commission has published a consultative paper inviting comments on the best way forward to a single European payments area (SEPA).

Self-regulation or legislation?

In its introduction, the Commission’s paper states, that it seeks to “support, underpin and enhance self-regulatory activities of the industry.” However, if the industry does not take the necessary steps, or if it drags its feet, the Commission is clear that it will not hesitate to bring forward regulation. “Whilst the preference is for market-led solutions, regulatory action is not ruled out where there is a risk of market failure that could put the economy wide benefits of the project at risk”, the paper continues.

Further, “The Commission believes that SEPA should remain primarily a market-led process. However […] the Commission reserves the right to take regulatory action and enforce competition law if these gains or effective competition are put at risk.”

Full integration

The Commission is also clear that its goal is a fully integrated payment system which includes national and supra-national transactions. The paper states, “A mini-SEPA that only delivers solutions for cross-border payments in Europe is not acceptable. This will only add an extra payment system on top of the 25 national systems and thus increase cost and not create great benefits.”

ECB Report

Days after the Commission’s paper, the European Central Bank published its fourth progress report on the single European payments area. The report urges the banking industry to stick to the timetable already set by the European Payments Council which envisaged new credit transfer and direct debit schemes and a single cards framework as being in place by 2008, with migration of the majority of transactions by 2010. The ECB report, however, recognises that these deadlines are tight and may have to be extended.

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