15 Retail payment services
| (25133)
15832/03
COM(03)718
| Commission Communication concerning a New Legal Framework for Payments in the Internal Market (Consultative Document)
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| Legal base | — |
| Document originated | 2 December 2003
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| Deposited in Parliament | 9 December 2003
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| Department | HM Treasury |
| Basis of consideration | EM of 16 January 2004
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| Previous Committee Report | None
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| To be discussed in Council | None planned
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited.
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Background
15.1 The existing framework for payments and retail payment services
is based upon national rules, which differ widely across the EU.
The Commission says this is detrimental to the deployment of
an EU-wide payments infrastructure. The introduction of the euro,
industry-based initiatives such as TARGET (Trans-European Automated
Real-Time Gross Settlement Express Transfer) and the adoption
of Regulation 2560/2001/EC on cross-border payments, have
created the conditions in which the Commission thinks it desirable
to tackle the barriers that prevent the effective functioning
of a retail payment services market in the
EU.
The document
15.2 The Commission's Communication is a consultation
document seeking views on the scope of a "New Legal Framework
for Payments in the Internal Market" creating a "Single
Payment Area", for which it plans to propose legislation
as part of the Financial Services Action Plan. The document seeks
the views of interested parties on the general objectives and
principles that should govern the modernisation and simplification
of the regulatory framework applying to retail payment services
in the single market, covering payment markets, payment systems,
payment instruments, payment service users and payment service
providers. Service providers include both traditional ones, such
as banks and card companies, and new ones, such as telecommunications
operators.
15.3 The document covers:
- the relationship of payment
services to the smooth operation of the single market;
- reasons for considering legislation, including
removing legal barriers and uncertainty, increased efficiency
in an enlarged market, money laundering requirements and new technological
and market developments;
- guiding principles for a new framework, including
efficiency, security, competition, customer protection, neutral
legal provisions, new provisions adding value;
- the scope of payments to be covered by a new
framework;
- cooperation between the Commission (responsible
for single market aspects of payment services) and the European
Central Bank (responsible for financial regulatory aspects of
payment services).
15.4 The Communication has 21 annexes which deal
with detailed issues and, in some cases, have suggested drafts
for legal provisions.
The Government's view
15.5 The Financial Secretary to the Treasury (Ruth
Kelly) says:
"The Government welcomes the emphasis the Commission
is putting upon issues raised by payment systems and shares the
Commission view that an efficient cross-border payments area in
the EU is an important part of developing an efficient single
market.
"That said the Government intends to scrutinise
very carefully the proposals made in this document before making
an official response.
"The Government believes any measures proposed
should be proportionate to risk, and that legislation is only
used to remove legal barriers if they are shown to exist."
15.6 The Minister also tells us that the Department
is engaged in a comprehensive consultation with key stakeholders
and provides us with an initial Regulatory Impact Assessment (RIA)
of the document. In relation to benefits the RIA says "At
this stage it is impossible to suggest benefits on a per annum
basis. Business sectors that would be affected include banks,
e-Money issuers, payment service providers and retailers. Consumers
would also be greatly affected".
On costs it says "The
Communication lacks the detail to assess costs at this stage".
Of the RIA the Minister says "I have read the regulatory
impact assessment and I am satisfied that the benefits justify
the costs".
Conclusion
15.7 Legislative proposals arising from this consultative
document could have significant consequences for UK payment services
providers and consumers. Before considering it further we should
like to seek the response the Government will be making to the
Commission on the issues discussed.
15.8 We should also like to hear from the Minister
on both:
- what the relationship is
between a Single Euro Payment Area mentioned early in the Communication
and the Single Payment Area discussed subsequently;
- on what, given the absence of quantification
of either benefits or costs in the initial RIA, she bases her
view that the benefits justify the costs.
15.9 Meanwhile we do not clear the document.
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