EU Approves revisions to Regulation 2560
07 May 2009
In a communiqué issued by the French Banking Federation here (in French), the French SEPA committee has announced that it has broken ranks with the European Payments Council (EPC) and has deferred the implementation of the SEPA Direct Debit until November 2010, exactly one year after the date agreed by the EPC.
The French dispute is with the European Commission rather than with the EPC, and relates to certain aspects of the interchange fees which will be payable in relation to direct debit transactions under new revisions to Regulation 2560/2001.
The presentation of a united front by the bankers of Europe has been the foundation stone of the EPC, and this breaking of ranks may significantly weaken their position in Europe. The French communiqué amounts to the breaking of promises given by EPC to the EU Commission for a general SEPA-wide Direct Debit launch in November 2009. Certain other countries are known to have issues concerning the launch date, and the French move may bring those issues into sharper focus and cause others to defer. Other countries, particularly Britain, have accelerated their SEPA-related programs, and so a clear divide is emerging.
The French bankers discomfiture with SEPA has previously been covered on this website. It has been going on for some time and the French have boycotted many committee meetings of the EPC.
Interchange fees are fees paid by the originating bank to the completing bank for certain transaction types which are cleared from one bank to another. Such fees may be viewed as a means of sharing revenue between the banks involved. In Ireland, interchange fees have not been payable between banks in relation to cheque, credit, or direct debit clearing, but have been an element of the credit card industry throughout the world. They have also been payable in relation to certain types of foreign exchange transactions.
Regulation 2560/2001 is a regulation introduced on 12 December 2001 – just a fortnight before the issuance of Euro notes and coin. The regulation limited banking charges on cross-border transactions between Eurozone countries, and committed the EU to certain reviews of such fees. The effect of Regulation 2560 was considered by the banks at the time to be so severe that it led directly to the formation of the European Payments Council and to the acceptance by the banking industry of the SEPA concepts.
The revisions to Regulation 2560 have been adopted by the European Parliament on 24th April 2009, are expected to be approved by the Council in early May, and should become applicable in member states from 1 Nov 2009, coinciding with the Payment Services Directive, and the launch of the SEPA Direct Debit.
The effects of the revisions include:
- Extending price parity to Direct Debits. This means that charges for cross-border direct debits must be limited to those for comparable domestic direct debits. According to the EPC, this is “based on the flawed assumption of legacy direct debit services and SEPA Direct Debit services being comparable which in fact they are not.”
- The setting out of clear rules for transaction-based multilateral interchange fees until November 2012
- Banks in the euro area are mandated to become reachable for SEPA Direct Debit collections from November 2010.
This latter revision carries implications which suggest that SEPA is no longer considered as a voluntary initiative by the banking industry.