1. The SEPA Commitment for banks
Björn Flismark
Warsaw 16 April, 2007
A single market for Euro payments
in Europe
The SEPA Commitment for banks
The SEPA project will create a Single market for Euro payments in Europe.
SEPA is an important part of the Lisbon Agenda which seeks to make Europe the most competitive financial market in the world by 2010.

2. EU13 EU27 EEA+CH SEPA will cover Europe! Geographical aspect of SEPA
EU 13 – The Euro countries now including Slovenia who adopted the EURO on 1 January 2007
EU 27 – The EU which now consists of 27 countries. Romania and Bulgaria joined the EU on 1 January 2007
EEA + CH – EEA consists of Norway, Iceland, Liechtenstein and Switzerland.
All of Europe will be affected. 2

3. SEPA – a single market for payments = Euro Payments Convergence
A politically driven and encouraged process
Pay and receive
to a single account
with a single set of instruments
in a single format
throughout the EU
Payments in Euro – easy, safe and efficient as the best of national systems – no differentiation between cross-border and national
An enabler and catalyst for EU market integration and increased competition
Creating a Single market for payments is a key goal for the EU. This is a logical step to reach the full benefits of the single currency.
There will be no distinction between cross-border and national payments in SEPA. It should be enough to have one account.
A new format will be introduced for SEPA payments in Europe in Euro based on ISO XML standard.
There is a strong focus on increased efficiency. SEPA should be as good or better than existing national systems. The high efficiency in the Nordic markets is seen as a benchmark.
SEPA is necessary in order to realise the Lisbon Agenda to make Europe the most competitive economic area in the world.
SEPA is introduced by the EPC through process of self-regulation

4. SEPA introduced through self-regulation
European Payments Council, EPC
Created to implement SEPA
Members are banks and national banking associations
Decision-making body representing the European Banking industry
Payments Services Directive
New legislation supporting SEPA
The European banking industry has created the European Payments Council, EPC to deliver SEPA. The EPC has some 60 members.
SEB is a member of EPC.
The EPC is working closely together with The European Commission and the European Central Bank.
New legislation will be implemented by end of April The new Payment Services Directive will become effective by the 1 November at the latest.

5. SEPA foundations – a combination of legislation and self-regulation
Payment Services Directive (PSD)
EC 2560/2001 XBD
Legal framework
EPC (Euro only)
SEPA Direct Debit Rulebook 2.2 (SDD)
SEPA Credit Transfer Rulebook 2.2 (SCT)
SEPA Cards Framework (SCF)
SEPA Adherence Agreements
PEACH/CSM Governance Framework
SEPA Data Formats (ISO XML)
Self regulation
Market acceptance
Communication
Competitive offerings
Stable infrastructure in place
SEPA will be built on a combination of legislation and self- regulation.
New EU wide legislation, the Payment Services Directive, PSD, will be introduced. This will support the self-regulation introduced by the EPC.
The EPC has delivered Rulebooks for Credit Transfers and Direct Debits and a Framework for Cards and Cash.
In addition there is a Framework for Clearing and Settlement which gives details on the rules Clearing organisations have to follow.
Communication on SEPA will be made to all customers. This will describe what is new with SEPA and how the product offerings look and the benefits of them. 5

6. The SEPA Schedule 2007 2008 2009 2010 2011 NOW DEADLINE 1 DEADLINE 2
Implementation
and deployment
2007
SEPA
instruments
available
Migration: Co-existence and gradual adoption
Credit Transfers Cards
2008
2009
Direct Debit
2010
SEPA
Instruments in general use
Harmonisation completed:
Decommissioning of national instruments
2011
The EPC has agreed a Schedule for introducing SEPA. On 1 January 2008 SEPA will be introduced. Banks will start offering SEPA products.
From 2008 (Deadline 1) SEPA Credit Transfers and SEPA Cards will be introduced. The new Direct Debit scheme will be introduced in 2009 but this is subject to the introduction of the Payment Services Directive, now scheduled to become law on 1 November
During the migration phase new and old products will coexist.
By the end of 2010 (Deadline 2) a significant part of payments will have moved to SEPA making the process irreversible.
By the end of the migration period it will be possible to start closing down (decommission) old systems.
Customers need to consider how they need to prepare for SEPA and when they will adopt SEPA products.
These preparations can include upgrading ERP systems and adopting XML. 6

7. SEPA impact for banks – what do banks need to do?
Adopting EPC Rulebooks and SEPA Cards Framework and other EPC Documents
SEPA Credit Transfers from 1 January, 2008
SEPA Direct Debit from 2009 (PSD dependence)
Signing Adherence Agreements
Establish reachability
A bank must be reachable, i.e. all other banks must be able to send Payments and Direct Debit collections
As a minimum be reachable through a PE-ACH*
Offer SEPA products to their customers
Sending and receiving SEPA Credit Transfers on behalf of their customers
Handling Direct Debit collections for their customers
All banks will need to consider SEPA and what to do. Most of them need to sign the Adherence Agreement. All will have to live up to the Rulebooks and other EPC documents.
Reachability must be ensured by every bank. Each must be reachable through PE-ACH.
Banks must also offer SEPA products actively to their customers. Over time
*PE-ACH = Pan-European Automated Clearing House;

8. Implementation – roles and responsibilities
Banks must be ready operationally by 1 January 2008
Readiness means adapting and testing
internal systems and interfaces
external interfaces
product design
legal aspects
EPC will monitor implementation through coordination with national communities
EPC will provide testing strategies and test scenarios
Swift and EBA will conduct testing
Banks must continue the process to become operationally ready for 1 January 2008.
All system preparations must be continued and finalised. All communities will have to coordinate these activities to ensure that also the country is SEPA ready.
Testing activities will be 8 8 8

9. How to REACH them all? Can you be REACHED?
Number of Banking Institutions in EU (2003) around 9.000
Austria
Belgium
Cyprus
Czech Republic
Denmark
Estonia
Finland
France 1491
Germany 2311
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg 171
Malta
Netherlands
Poland 650
Portugal 198
Slovakia
Slovenia
Spain
Sweden
United Kingdom 427
How to REACH them all?
Can you be REACHED?
Source: ECB

10. Clearing and Settlement for SEPA
PEACH/CSM framework governs clearing and settlement of SEPA payments
All Scheme participants must be reachable through PEACH as a minimum
Other options such Clearing and Settlement Mechanisms can be chosen in addition
EPC has adopted a framework for Clearing and Settlement.
It is necessary for the PEACH/CSM to fully follow the new SEPA Standard ISO in order to be SEPA compliant.
Transactions that are not compliant will be rejected.
Reachability is a key component of SEPA.
All banks must be Reachable and all banks must be able to reach all banks.
All banks must chose a Clearing and Settlement Mechanism that allows for end – to – end SEPA Compliance.
Banks can also chose to do bilateral exchange of files. 10

11. Impact for non-Euro countries
The SEPA Schemes will likely impact non-euro countries
Direct Debit in Euro might be collected against a non-euro account
SEPA XML ISO standard may be adopted also for non- euro transactions
Rulebooks for Credit Transfers and Direct Debit may influence or supersede current non-euro domestic rulebooks
Most of the focus of SEPA is on the Euro, but the whole of EU will be affected irrespective of currency
Many customers will see the benefits of cross-border Direct Debits
Creditors will be able to sell to customers from other countries using the new Direct Debit Scheme.
Over time the new SEPA standard may be adopted also in non-Euro countries
One single set of rules for Credit Transfers and Direct Debits may be beneficial. 11

12. Geographical reach of SEPA and impact of PSD
Existing structures
New structures
Non EUR
EEA + CH
Domestic payment instruments and infrastructure (Non-EUR)
SEPA payment instruments and infrastructures (EUR)
EU27
EUR
EU13
Domestic payments instruments and infrastructure (EUR)
Through SEPA new payment instruments and Infrastructures for the EURO is introduced.
The PSD supports SEPA by offering a Single legal framework in EU 27. EEA and Switzerland will adopt similar legislation.
The existing domestic payment instruments, both in EUR and other national currencies will also be affected by PSD.
This will have an impact on Execution time, Transparency regarding pricing and Availability of funds.
The PSD will have far greater effect on current domestic payment instruments, since all will be affected.
PSD
SEPA
Source: Euro Banking Association

13. Thank you for your attention!
More international than the local banks and more local than the international banks