EU ministers undecided on single payments area

While finance ministers are still debating the proposal for a directive on the the legal framework for a single European payment market, the banking sector is calling for more certainty. At a conference stakeholders pointed out the challenges, as well as opportunities, of SEPA.

Progress in the Council on the proposed directive on SEPA directive has proved to be slow at the EcoFin meeting on 28 November 2006. Finance ministers did not reach a political deal, but instead took note of a progress report. 

Ahead of the Council meeting Internal Market Commissioner Charlie McCreevy told the Parliament on 21 November 2006: “We all need to move, and move rapidly right now. The market, through the innovations made by operators, is moving ahead quickly. Legislators are falling behind. Member states need to move beyond national preoccupations.”

Indeed the Commission’s target to set up SEPA from 1 January 2008 and replace national payment systems by 2010 is already threatened. It is therefore likely that an adoption of the framework directive will take longer than expected.

Meanwhile, stakeholders from the banking sector have voiced their positions. Speaking at a conference in Brussels on 28 November 2006, Gerard Lysaght of VRL Knowledge Bank said that SEPA was the next logical step after introducing the euro. Nevertheless, he pointed out the challenges, quoting McKinsey’s estimate of the potential costs amounting up to €20 billion in lost annual revenue due to the implementation of SEPA, but also acknowledged the opportunities. 

Peter AyliffePresident and CEO of Visa Europe called for constructive co-operation with regulators with a long-term view. He pointed to the opportunities that SEPA brought for banks, consumers and the wider economy. He said it was a "once-in-a-lifetime opportunity to bring competition and innovation to the market". He also encountered fears voiced by the ECB in its recent report on SEPA of a possible increase in costs, arguing that rather pricing will become more competitive. He underlined that the main concerns for banks were the cost and operational challenges of creating SEPA, the tight timeline, as well as the current regulatory uncertainty.

Jean-Paul GauzèsChristian Democrat MEP  and rapporteur for the SEPA directive, said it was important to find an agreement soon and to adopt the directive at first reading as there are important investments to be made and banks need to be certain of the legal framework that will apply to them.
Wiebe Ruttenberg, head of division market infrastructure at the European Central Bank (ECB) welcomed the "tremendous work" that has been done by banks, but also said that more had to be done in order to meet the 1 January 2008 deadline. He urged national migration plans to be implemented as soon as possible and underlined the crucial importance of scheme governance. He said that one of the main concerns was to prevent national fragmentation.

Michael Thom from the Commission's DG Markt said he "can not think of any project that has the potential that SEPA has". He supported the ECB’s views and welcomed the quick agreement between the Commission and the Parliament. He said that the main issue was now to overcome differences in the Council, especially concerning the question of payment-service providers.

Niklas Bartelt underlined that his DZ Bank was strongly committed to SEPA. He said it was important to create a level playing field and an environment that allows innovation.

Pilar Aurrecoecha de la Torre of Caja Madrid gave the example of Spain where she said a "mini-SEPA" had been undertaken to harmonise systems in the Spanish banking market. She pointed out that this had been a positive experience, which helped the market to become more dynamic and increase competition and innovation.

Francesco Burelli from Capco consulting agency said that there was still a general lack of understanding what SEPA means and the industry did not know how to change and what to do. He pointed out that the lack of development had triggered scepticism among the industry. Nevertheless, he confirmed that 70% of banks now expected the Commission to legislate on SEPA. But he also drew attention to the costs, amounting up to €4 billion of potential annual loss on interchange and 5.2 billion on non card payment instruments.

The EU seeks to remove the remove obstacles to and reduce the costs for cross-border payments for consumers by creating a Single European Payments Area (SEPA). However, there has been only limited progress, since banks are reluctant to apply standards and fear competition being opened up to non-banks, which would make it difficult to reach the 2010 target for full market integration. 

In a 2005 directive proposal, the Commission has laid out a common legal framework, which was adopted by a large majority in the Parliament. It is now up to the Council to decide.

  • Cross-border transfer rules are expected to be applied to amounts up to €50,000 from 1 Jan 2006. 
  • EPC's SEPA payments instruments should be rolled out by 2008.
  • EPC projection for full single European infrastructure is set sometime beyond 2010. 


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