11 Single Euro Payment Area
| (32372)
18095/10
+ ADDs 1-3
COM(10) 775
| Draft Regulation establishing technical requirements for credit transfers and direct debits in euros and amending Regulation (EC) No 924/2009
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| Legal base | Article 114 TFEU; co-decision; QMV
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| Document originated | 16 December 2010
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| Deposited in Parliament | 22 December 2010
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| Department | HM Treasury
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| Basis of consideration | EM of 17 January 2011
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 The Single Euro Payment Area (SEPA) is a banking industry
initiative, building on the European Payment Services Directive
of 2007 and a 2001 Regulation on cross-border payments, which
requires the price of euro cross-border payments to be the same
as for an identical national payment. SEPA aims to deliver pan-European
schemes and infrastructure that enable electronic payments in
euros across 31 countries, that is the Member States and Iceland,
Liechtenstein, Norway and Switzerland, to be made as cheaply,
easily and efficiently as payments inside individual Member States.
The three core SEPA mechanisms are a SEPA credit transfer (SCT)
scheme, a SEPA cards framework and a SEPA direct debit (SDD) scheme.
The document
11.2 This draft Regulation is intended to promote the SEPA
by establishing common technical requirements for credit transfers
and direct debits in euros. It does not apply to payments made
in sterling and other non-euro currencies and does not affect
payments made by cheque, plastic card or cash.
11.3 Standardising the way in which payments
in euros are made by direct debit and credit transfer calls for
these types of payment instructions to follow a common form and
use a common electronic language. The draft Regulation will require
use of a common form based on norms developed by the International
Standards Organisation in ISO 20022 and a common electronic language,
XML. New forms of direct debit and credit transfer will therefore
replace the existing forms of national direct debits and credit
transfers. The draft Regulation will also set binding dates for
switching to the new harmonised regime.
11.4 Standardising the form in which payments
are made in euros is expected to generate substantial economic
benefits, the main ones of which are that the form will:
- enable a payment instruction
to be processed electronically from the point where a payment
originates to the point where it is paid to a recipient anywhere
within the European Economic Area; and
- promote competition between payment service providers
and more innovation in the market.
11.5 The principal change that UK consumers and
small businesses may notice, when making a direct debit or credit
transfer payment in euros, is that they will be required to use
an international bank account number (IBAN) and bank identifier
code (BIC) when making domestic as well as cross border payments
in euros. Their own IBAN account numbers and BIC codes are already
printed on their bank statements alongside their UK account numbers
and sort codes.
11.6 The principal changes for banks and other
institutions, that provide euro payment accounts to customers
(such as euro current accounts), is that these accounts will need
to be accessible by other payment service providers for the purpose
of paying or receiving funds via a direct debit or credit transfer
and for clearing and settlement of accounts between payment service
providers. The supporting infrastructure of electronic systems
will therefore need to be capable of working together seamlessly,
based on the ISO 20022 common standards to be laid down by the
Regulation. The necessary infrastructure is already in place in
the UK, although further investment may be necessary in some other
Member States.
The Government's view
11.7 The Financial Secretary to the Treasury
(Mr Mark Hoban) says that:
- the Government agrees with
other Member States, the Commission and the European Central Bank
that a mandatory completion date for switching direct debits and
credit transfers to a common standard has become necessary;
- a public consultation by the Commission has also
found widespread support for legislation; and
- without legislation there is a high risk that
the new standards will continue to operate alongside the old national
standards without generating the expected efficiency gains and
competition benefits.
11.8 The Minister comments further that:
- the draft Regulation will benefit
UK consumers and businesses that make cross border payments in
euros, as it is expected that such payments will become easier
to make electronically, and as increasing competition brings down
the cost of these payments;
- it will also benefit the banks that handle such
payments, as the manual processing of payments will be significantly
reduced — for example, a business that makes regular payments
(such as paying salaries) in more than one country will be able
to do so by submitting a single set of payment instructions to
its bank in the UK;
- an individual with a holiday home in another
country will be able to pay direct debits and standing orders
in the same way;
- banks that have invested in the payments infrastructure
will be able to compete to carry out payments across the whole
EEA;
- the impact of the proposal in the UK is likely
to be minimal, because it does not apply to non-euro accounts;
- the new standards will not therefore apply to
accounts in sterling — in the UK payments in euros represent
less than 0.1% of total retail payments;
- UK banks that handle euro payments have already
invested in adopting the new international standards and are ready
to apply them — the UK is therefore already compliant with
the main requirements of the draft Regulation as it relates to
banks;
- the proposal will ban multilateral interchange
fees for direct debit transactions (interbank fees which may be
passed onto customers), except in certain circumstances where
a payment does not go through as expected — these types
of fees are not a feature of the UK direct debit system so the
ban is not expected to have an impact in the UK;
- there are longer transitional periods for entry
into force of the proposal by non-euro Member States — the
deadline for ensuring reachability will be extended from 24 months
after entry into force until 31 October 2014 and that for ensuring
that direct debits and credit transfers are carried out under
the new standards will be extended from 24 months to 48 months
after entry into force;
- this will ensure that businesses and public bodies
that make payments in euros have adequate time to adapt to the
new standards; and
- given the UK's non-euro status and the small
proportion of direct debits and credit transfer payments that
are made in euros, the financial implications of the initiative
are negligible.
11.9 The Minister concludes that the Government
will review the technical drafting of the proposal and looks forward
to engaging in the Council's examination of the proposal to ensure
that its benefits are realised in the most proportionate way that
preserves private sector freedoms.
Conclusion
11.10 This draft Regulation will be an important,
albeit largely technical, step in facilitating operation of the
Single European Payment Area. As such, whilst we have no questions
on it and clear the document, we draw it to the attention of the
House.
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