Veille Juridique

EPC Newsletter

Issue 20 - October 2013

SEPA 2014: Get Ready. Now.

The October 2013 edition of the EPC Newsletter takes another close look at the SEPA readiness of market participants three months ahead of the 1 February 2014 SEPA migration deadline applicable in the euro area mandated by European Union (EU) law.

In the article, entitled ‘SEPA 2014: Clearing and Settlement Mechanisms are Ready to Turn up the Volume’, we report on the preparations of clearing and settlement mechanisms for the mass migration of euro credit transfers and direct debits to the SEPA-only environment. We also analyse progress among stakeholders including banks, corporates, small and medium-sized enterprises (SMEs) and public administrations in the 17 euro area countries. The most recent qualitative SEPA indicators published by the European Central Bank (ECB), which reflect the assessment by national central banks as of the third quarter of 2013, show that a large majority of stakeholders are expected to be SEPA-compliant on time. Further efforts are required however to ensure SEPA readiness, in particular, of all SMEs in the euro area by 1 February 2014.

On 24 October 2013 the ECB published its second SEPA migration report. It shows that migration to SEPA Credit Transfer is generally progressing swiftly. However, most stakeholders will only be migrating to SEPA Direct Debit in the last few months before the 1 February 2014 deadline. The ECB points out that this approach generates operational risks and limits the ability to tackle any issues or unexpected developments that might arise during the changeover period. In their article, Wiebe Ruttenberg and Gergely Kóczán of the ECB reiterate: “Everybody has to be ready on 1 February 2014 or risk disruptions in their individual handling of payment orders. After 1 February 2014 payment service providers will not be allowed to process payment orders that do not comply with the legal requirements as laid down in applicable EU law.”

With this edition, we also take the opportunity to address observations occasionally articulated in the public debate which indicate that misunderstandings persist as to who invented the SEPA concept and mandated migration to SEPA. Javier Santamaría, Chairman of the European Payments Council (EPC), clarifies (again): it was not the EPC.

SEPA is a policy-maker-driven EU integration initiative pursued by the EU governments and the EU institutions, i.e. the European Commission, the European Parliament, the Council of the EU representing EU Member States and the ECB. Santamaría revisits the rationale for SEPA as defined by the EU governments and EU institutions and their expectations on the benefits for payment service users to materialise once SEPA is completed.

Santamaría also points out: the proof of the pudding is in the eating. In a further article, he highlights the testimony of representatives of businesses and public entities, who reported on their successfully completed SEPA migration projects. These SEPA pioneers confirm: SEPA pays off.

Please recommend the EPC Newsletter to your colleagues – subscription is free by clicking here. The next issue will be published in January 2014.

Focus: SEPA Migration

SEPA 2014: Clearing and Settlement Mechanisms are Ready to Turn up the Volume Clearing and settlement mechanisms are prepared for the ramp-up towards the SEPA-only environment in the euro area by 1 February 2014

30.10.13 By Etienne Goosse

INTRODUCTION AND SUMMARY

Clearing and settlement mechanisms (CSMs) enable the exchange of funds (money) and messages between two payment service providers (PSPs) executing a payment transaction. Services offered by competing CSMs, based on the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes, are governed by market forces and are outside the scope of the European Payments Council (EPC). CSMs have processed SEPA transactions since the launch of the SCT Scheme in January 2008 and the SDD Schemes in November 2009. Based on data made available by the European Central Bank, there are some 36 billion credit transfers and direct debits processed annually in the euro area. From 1 February 2014 onwards, CSMs will handle this volume in line with the relevant provisions of European Union law which effectively mandates migration to SEPA in the euro area by this date. To strengthen the dialogue between the EPC as the SCT and SDD scheme manager and the SEPA-compliant CSMs, the ‘EPC Clearing and Settlement Forum’ was created in 2011. In this article, José Beltrán, Chairman of the Board of the European Automated Clearing House Association (EACHA), and Erkki Poutiainen, Chairman of the Board of EBA CLEARING, report on the preparations of CSMs for the mass migration of euro credit transfers and direct debits to the SEPA-only environment.

Key Information in this Article

José Beltrán, Chairman of the Board of the European Automated Clearing House Association (EACHA), and Erkki Poutiainen, Chairman of the Board of EBA CLEARING, shared, among others, these comments on the transition to the SEPA-only environment by 1 February 2014 in the euro area:

Migration to SEPA Credit Transfer (SCT):

José Beltrán: The SCT Scheme was launched in January 2008, so a priori, no major challenge is expected in the interbank to clearing and settlement (CSM) space. However we should be cautious not to be overly confident as close to 50 percent of euro credit transfers have yet to migrate to SCT by the 1 February 2014 deadline applicable in the euro area. This is not only dependent on the CSMs or their users; i.e. payment service providers (PSPs). Ultimately, the volume is generated by bank customers who must migrate to SCT and SDD.

Erkki Poutiainen: SCTs have been cleared and settled with increasing volumes since 2008 and several communities have already moved their national credit transfer flows to the SEPA formats and processing channels. However, as the migration of large volumes is stretched to the last minute, we need to be prepared to act upon any exception scenario we can think of.

Migration to SEPA Direct Debit (SDD):

José Beltrán: From a CSM point of view, processing SDDs is not more complex than processing SCTs, but we need to appreciate that the changes required by PSPs and their clients to become SDD-compliant are very significant.

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