Explanatory Memorandum to COM(2013)937 - Amendment of Regulation (EU) N° 260/2012 as regards the migration to Union-wide credit transfers and direct debits - Main contents
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| dossier | COM(2013)937 - Amendment of Regulation (EU) N° 260/2012 as regards the migration to Union-wide credit transfers and direct debits. |
|---|---|
| source | COM(2013)937  |
| date | 09-01-2014 |
Regulation (EU) No 260/2012 establishes common technical and business requirements for credit transfers and direct debits in euro and as such is an important building block in the realisation of a single euro payments area (SEPA). That Regulation sets 1 February 2014 as the end-date in the Eurozone for the migration of domestic as well as intra-European credit transfers and direct debits in euros towards SEPA credit transfers (SCT) and SEPA direct debits (SDD).
According to the latest statistics of the European Central Bank (ECB), the overall migration rate in the euro area for SEPA Credit Transfers (SCT) has increased from 59.87% in October 2013 to 64.1% in November, whereas the overall migration rate for SEPA Direct Debits (SDD) has increased from 11.52% in October to 26% in November. Notwithstanding the Commission's repeated efforts to raise awareness among Member States' competent authorities, and the significant campaigning efforts as regards SEPA migration undertaken by the European Central Bank and in many Member States, SMEs, small public administrations and local authorities continue to be the least prepared for actual migration. The communication efforts by the banking industry vis-à-vis SMEs and national information campaigns do not seem to have produced the expected effects or at least not to the expected extent.
Considering the low migration pace in some Member States for SCT and in most Member States for SDD, it appears very unlikely that the SEPA migration will be fully completed on 1 February 2014. However, in view of this legal end-date, banks and other payment service providers are likely to refuse from that date onwards to process legacy payments which are not SEPA compliant. In the absence of full migration to SCT/SDD, payment incidents leading to delays in payment or market disruptions cannot be excluded. These might affect all payment services users, and particularly SMEs and consumers.
Given this major legal problem and the potentially severe consequences for citizens and companies, the Commission proposes to amend Regulation (EU) No 260/2012 by introducing a grandfathering clause allowing banks and other payment service providers to continue also after 1 February 2014, for a limited period of time of 6 months, the processing of non-compliant payments through their legacy payments schemes alongside SCT and SDD. A clear communication of such amendment will provide certainty to the payment service users that their payments will continue to be processed after 1 February 2014, and it will allow those that have not yet migrated to do so as rapidly as possible. The end-date itself is not amended, and the grandfathering is an exceptional one-off measure. Under all circumstances, on-going information campaigns on the SEPA migration should continue. At the end of the grandfathering period, the Commission will not hesitate to take the necessary steps to ensure the full application of EU law by the Member States.
Participants of the SEPA High Level meeting which brings together high level representatives from the European Central Bank and board members of the central banks of the Eurosystem have been consulted on this initiative on 19 December 2013.
In view of the above and given the very short period of time left before 1 February 2014, this Regulation should be adopted by the European Parliament and the Council as a matter of urgency and enter into force without delay. The Regulation is necessary in order to avoid legal uncertainty for banks and other payment service providers, as well as undertakings and consumers, as Regulation (EU) No. 260/2012 would oblige payment service providers to refuse to process after this end-date payments in euro that are not compliant with the SEPA requirements. Not adopting the proposed Regulation as a matter of urgency could result in serious legal and technical risks in payments transactions from 1 February 2014 onwards.
Regulation (EU) No 260/2012 entered into force on 31 March 2012, giving market participants two years to adapt their payment processes to the SEPA requirements for SCT and SDD. During those two years, the Commission and the ECB, together with the national public authorities have closely monitored the progress of SEPA migration. The ECB has regularly issued progress reports on the progress of the SEPA migration. Several SEPA Council meetings have taken place, in which the Commission discussed the migration progress with representatives from both the supply and demand side of the payments market, insisting on the need to intensify communication towards payment service providers as well as towards all categories of payment services users (corporates including SMEs, public administrations, consumers, etc.). On 30 March 2012, the Commission organised a dedicated workshop on the interpretation of Regulation (EU) No 260/2012 with SEPA Council technical experts, and again on 12 July 2013 with Member States representatives. On 17 April 2013, the Commission also organised a technical expert group on SEPA. The Commission has furthermore discussed the progress both in the EU SEPA Forum that takes place twice a year, and the Payments Committee with Member States representatives. SEPA migration has regularly featured on the agenda of many technical meetings of the ECB with representatives of national central banks, as well as in some fora with representatives from the banking industry.
In view of the low migration rates published by the ECB in its March 2013 report on SEPA migration, the ECOFIN Council of 14 May 2013 adopted comprehensive Council conclusions stressing the importance of SEPA migration and calling on Member States and market participants to actively support and speed up the SEPA migration process by taking relevant measures. Following the ECOFIN conclusions, a joint letter of the Commission and the ECB was sent to Ministers of Finance and Governors of national central banks on 15 May 2013, also stressing the importance of SEPA migration and the urgent need for action at national level.
Draft legislative acts, including proposals from the Commission, sent to the European Parliament and to the Council must be forwarded to national parliaments in accordance with the Protocol (No.
1) on the role of national Parliaments in the European Union, annexed to the Treaties.
According to Article 4 of the Protocol, an eight-week period must elapse between a draft legislative act being made available to national Parliaments and the date when it is placed on a provisional agenda for the Council for its adoption or for adoption of a position under a legislative procedure.
However, exceptions are possible under Article 4 in cases of urgency, the reasons for which must be stated in the act or position of the Council. The Commission invites the European Parliament and the Council to consider this proposal as a case of absolute urgency for the reasons explained above.
In view of the low migration rates, published by the ECB in December 2013, the Commission and the ECB have analysed the likelihood that the SEPA migration would be fully completed on 1 February 2014. It was acknowledged that this would be highly unlikely despite the fact that several big payment services users, such as utility companies with bulk payments, have indicated that they are planning to migrate close to the end date.
Although it is difficult to provide an estimation of the number of market participants that will not be SEPA compliant by the legal end-date, it is clear that in particular in the area of SDD the migration rates will not anywhere be close to 100%.
Banks and other payment service providers are likely to refuse to process non-compliant SEPA payments as of 1 February 2014. The largest non-migration risk is related to SMEs many of which have not yet migrated. In light of this risk, the ECB has analysed possible scenarios and their impact with possible solutions to remedy the situation. Technically, payment service providers would be able to continue with the processing of non-compliant payments through the use of legacy schemes. In addition, market participants that are not yet SEPA compliant would need to be identified and be informed adequately on how to migrate to SEPA in an efficient manner.
Even though it may be technically feasible for market participants with the support of the overseers to implement intermediate solutions to overcome potential migration issues after 1 February 2014, there is a genuine risk that this unsatisfactory situation may lead to confusion for both consumers and other payment service users, and legal uncertainty for payment service providers confronted with market participants that have not (yet) implemented these intermediate solutions. Among the non-compliant market participants there are many SMEs. The fact that their legacy payments may not be processed by the banks after 1 February 2014 could also cause reputational damage to the Euro system as a whole. It is unlikely that intermediate solutions, even if technically feasible, will be implemented in time.
In order to avoid unnecessary payment disruptions resulting from non-compliance with SEPA and to ensure legal certainty for all market participants, the Commission considers it justified to propose to allow, after 1 February 2014, the co-existence of national legacy systems next to SCT and SDD schemes for a limited period of time of 6 months. The length of such transitional period should be proportionate. The aim would be to uphold the pressure on market participants to migrate as soon as possible, while at the same time ensuring legal certainty and that the costs for payment service providers of a continued parallel run of two payment systems is limited. Those payment service providers that have already migrated to SCT and SDD may consider providing conversion services to market participants that have not yet migrated. During the transitional period, Member States should refrain from applying penalties to payment service providers that process non-compliant payments and to payment service users that have not yet (fully) migrated.
The introduction of an exceptional and one-off additional period during which processing of legacy payments will be tolerated will also allow for a gradual migration. In view of the approaching deadline, several of the larger utility providers have indicated that they will migrate close to the current end-date of 1 February 2014. This may create certain bottlenecks, particularly at the level of the payment service providers and the software vendors, who may be faced with certain capacity constraints.
Considering the current migration figures and the expected pace of migration, a grandfathering period of 6 months, until 1 August 2014, is considered appropriate. During this period, the Commission and the ECB, together with national authorities will continue to monitor the migration process closely and will be ready to take any additional measures, as appropriate.
This proposal is not accompanied by a separate Impact Assessment, as an impact assessment for Regulation (EU) No. 260/2012 has already been undertaken. This proposal does not alter the Regulation on substance and does not impose new obligations on businesses. It only aims at introducing a transitional period after the end-date defined in Article 6(1) and (2) of the Regulation to avoid legal uncertainty for supervisory authorities, payment service providers, undertakings and consumers.
Contents
- Legal elements of the proposal
- Budgetary implications
- Grounds and objectives of the proposal
- General context
- 2. Results of consultations with interested parties and impact assessments
- 2.1. Transmission of this proposal to the national parliaments
- 2.2. Consultation of other interested parties and impact assessment
The Commission proposes to amend Regulation (EU) No 260/2012 by introducing a 'grandfathering' clause which will allow banks and other payment service providers to continue until 1 August 2014 the processing of non-compliant payments through their currently existing legacy payments schemes, alongside SCT and SDD. This amendment ensures that market participants that are not ready for SEPA by 1 February 2014 can continue to make their payments and avoids any inconvenience for consumers.
The proposal provides that the amendment applies as of 31 January 2014. This provision also allows for a retro-active application in case the proposal is not adopted by the European Parliament and the Council before 1 February but just after this date. This will avoid a legislative gap as of 1 February 2014 which would create legal uncertainty.
The introduction of this transitional period for the phasing-out of the old systems shall be considered as an exceptional measure which will not be extended any further. Without prejudice to the different exemptions set out in Article 16 of Regulation (EU) No. 260/2012, all market participants shall therefore comply with the SEPA requirements by 1 August 2014.
The regulation does not have a budgetary impact for the Commission.