1. Single Euro Payments Area (SEPA) Nicoletta Stella (Market Infrastructures)

2. 2 Agenda Context: the political roadmap towards a single market in the EU The Industry Status

3. 3 The political ambition… The European Commission has stated its ambition for Europe to become the most dynamic and competitive economy by 2010 (so called Lisbon agenda). This means Strengthening the Internal market by removing obstacles to trade in goods and services. Developing efficient, cheap and secure payment systems and instruments. Setting up a new legal framework for all payments in the Internal Market. The legislator has shown its readiness to regulate the market to achieve its objectives. For instance, EC Regulation 2560 was issued in 2001, making it illegal to price differently for domestic and cross-border payments in euro.

4. 4 … and the response of the financial industry The banking industry (as represented in the EPC - European Payments Council) has committed to the creation of a Single Euro Payment Area (SEPA) by 2010 in a step by step approach. SEPA definition was formulated as follows: “SEPA will be the area where citizens, companies and other economic actors will be able to make and receive payments in euro, within Europe, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of their location.” SEPA = domestic European market for euro payments

5. 5 The SEPA context European Payments Council: Self regulation Standards setting SEPA European Commission: Legislation Harmonisation of law Consumer protection Level playing field European Central Bank: Smooth running payment systems Industry: Consolidation of payment processors Outsourcing/Insourcing New market entrants New business models

6. 6 SEPA – The landscape Europe todayOutlook: SEPA National / local solutions Different schemes, experiences, standards, consumer protection laws No interoperability of national schemes Only one potential PE-ACH in existence EBA STEP 2 One solution for Europe, supported by EC initiated Payment Services Directive, New common core schemes (SDD, SCT, cards) and experiences, consistent standards, harmonised consumer protection laws Improved interoperability : PE-ACH

7. 7 Which countries are joining SEPA? The entire SEPA scope is the 27 European Union member states and their territories together with Iceland, Lichtenstein, Norway and Switzerland SEPA implementation is aimed initially at the 13 Euro countries in 2008, however other countries are likely to join in the near future ( Malta and Cyprus adopting the Euro in 2008) Austria Netherlands Portugal Belgium France Germany Greece Ireland Italy, Spain Finland Luxembourg Cyprus Czech Republic Denmark Estonia Hungary Latvia Lithuania Malta, Poland Slovakia Slovenia Bulgaria United Kingdom Internal Market for Payment Services SEPA Development EU12 Romania Sweden

8. SEPA – The industry status

9. 9 The EPC Deliverables (1 of 2) SEPA Credit Transfer System Rulebook (approved) SEPA Direct Debit System Rulebook (approved) SEPA Card Framework (approved) SECA (Cash) Framework (to be approved) PE-ACH Framework (approved)

10. 10 The EPC Deliverables (2 of 2) SEPA Communication Framework “ Making SEPA a Reality” SEPA Direct Debit Implementation Guidelines SEPA Credit Transfer Implementation Guidelines

11. 11 1 - SEPA programme timeline Design & preparation Implementation & deployment Co-existence & gradual migration Programme activities 2 Milestones 1 - SEPA instruments available in market 2 - Critical mass migrated/SEPA irreversible subject to the commitment of all stakeholders 1 Design & specification implementation pilots national migration early adopters programme management, planning, communication, monitoring launch Here we are, on track

12. The Payment Services Directive (PSD)

13. 13 Payment Services Directive - outline OBJECTIVES Enhance competition between national markets and ensure a level playing-field Increase market transparency for both providers and users Harmonise rights and obligations of users and providers SCOPE All payment types in scope excluding cash transactions, and paper cheques. Payments between payment service user (= client) and provider (so interbank transactions are out of scope). Currency: all currencies of the European Union Countries: EU KEY DATES EC Proposal to Parliament: Dec 2005 Final approval: Q1 2007 PSD in force:1.11.2009

14. 14 Scope of SEPA and PSD Defined byGeographical scopeCurrency scope SEPA = Single Euro Payment Area European Payments Council (EPC) Full scope = EU27+EEA+ Switzerland Focus on ‘Euro land’ (EU12) Euro payments Payment Services Directive for Payments in the Internal Market European Commission EU27 (‘single payment area’) Payments in EU currencies.

15. 15 Overview of PSD impact Introduction of “Payment Institutions”, a new class payment service providers allowed to operate under a lighter regulatory regime (but not allowed to hold deposits or provide credit) Transparency and information requirements: –Clear information provision to clients before and after the transaction Unbundling/specification of fees charged Examples of PSD business impact: –Value dating no longer allowed for revenue generation (no hidden charges) –Full amount must reach beneficiary (no bene deduct practices allowed unless explicitly agreed) –From 2012, time cycle of D+1 for all payments –New client conditions to be communicated