EPC chairman 'shocked' at Brussels' 'competing' Sepa schemes

The head of the European Payments Council, the body tasked with coordinating payments-related activity among lenders on the continent, on Wednesday expressed dismay at the admission that in preparing regulation for Sepa payments, the European Commission was considering allowing multiple Sepa schemes at national levels.

"It is shocking," said Gerard Hartsink, executive at ABN AMRO and chair of the European Payments Council (EPC) at a panel discussion at Sibos, a payments conference hosted by Swift in Amsterdam, after Jean-Yves Muylle, head of retail issues, consumer policy and payment systems at the European Commission, said he did not see the risk of the market remaining fragmented with improved national schemes.

"We consider that if existing legacy schemes at national level would have to be modified to comply with the essential requirements [for Sepa payments] which would be contained in the regulation, they would be very close to the EPC schemes," Muylle said.

Including "competing schemes", as a draft of the regulation has done, would mean that the commission would allow clusters of banks in the euro area to continue in the "old world" while others move to the new, seemingly in opposition to the aims of Sepa, Hartsink said.

Sepa, which stands for Single Euro Payments Area, is designed to harmonise payment rules and specification to make cross-border euro payments easier and more competitive across 32 countries in Europe. At present most countries in Europe still retain national payment schemes which are not compatible with one another. The European Payments Council which brings together banks to agree on the rules and specifications, or "schemes", for payments, launched Sepa credit transfers and direct debits in late 2008 and 2009 respectively.

The use of these payment types has remained low however, as countries have retained pre-Sepa legacy schemes, leading to calls by the EPC and the European Central Bank (ECB) for legal measures to be taken at a continent-wide level to set an end date for national schemes.

In preparing the regulation, Muylle said the Commission was considering an approach where it would define technical requirements on the basis of existing Sepa schemes, with a couple of additional requirements to take into account the concerns of users. "We have heard a number of concerns from users," he said adding that the Commission would leave the door open to innovation. "Nothing today prevents competing schemes," he said, but added that the Commission is not mandating their creation.

"Lookalike" schemes would generate problems of interoperability, Hartsink said, and would mean countries could opt out of moving to the existing Sepa schemes. He was supported by Daniela Russo, the director general for payments at the ECB, who said re-opening the debate on Sepa schemes would be "extremely dangerous for the credibility of the whole project" and had to be "avoided at any costs". Hartsink said the ECB should consider making use of Article 22 of the central bank law, which empowers it to issue payments regulations, as a threat towards groups of banks who may try to break away from the current Sepa schemes.

Muylle said while he understood the need for clarity, uncertainty over the length of the legislative process meant that the Commission was looking at expressing the deadline in terms of a period after the regulation is approved, rather than a simple calendar date. The Commission is considering a deadline of 12 months after the law is approved for Sepa credit transfers, and 24 months for direct debits.

In its 7th Sepa progress report, published last week, the ECB put forward dates of November 2012 and 2013 for the two instruments. "It will all depend on how long it takes for the regulation to be adopted," Muylle said. "We hope the regulation can be adopted before the end of the year."