13 December 2013
Waivers to smoothen SEPA migration
The end date is in sight, Single Euro Payments Area (SEPA) will become reality on February 1st 2014. Every country in the SEPA zone has to be ready by then, because the introduction won’t be postponed. Some national banks have indicated that they need more time to implement some parts of SEPA. However, the SEPA Regulation also permits EU Member States to request waivers for a limited period of time after the SEPA end-date (until February 1st 2016) and under some restrictive conditions.
Waivers are not intended to undermine the set SEPA end date. The objective is to facilitate a more gradual SEPA migration from legacy payment services to SEPA schemes. This blog is to explain what waivers are and why they are necessary.
To explain more about waivers, it is useful to look at the motives of SEPA, which forms a key part of the European Union’s Vision of a Single Market. It refers to the creation of an integrated payments market intended to provide consumers and businesses with secure, competitively priced, user-friendly and reliable Euro payment services.
As defined by the European Payments Council, the geographical scope of SEPA extends to all 27 European Union Member States, including the three additional countries of the European Economic Area (EEA), namely Norway, Iceland and Liechtenstein, and also Switzerland, Monaco, Mayotte and Saint Pierre-et-Michelon. A list of the countries that participate in SEPA can be found in this previous post.
SEPA requires a process of harmonisation as such that there is no distinction between national and cross-border payments, which can be carried out under the same basic conditions and in accordance with the same rights and obligations, regardless of their location within the European Union.
In order to attain the full benefits, there is a need for regulatory intervention at European Union level to ensure the migration of existing national Euro payments to SEPA payments within a reasonable time frame. The technical requirements for credit transfers and direct debits are captured in regulation 260/2012 of the European parliament and of the council of March 14th 2012, the SEPA Regulation. The SEPA Regulation comprises a set of Recitals and Articles and sets February 1st 2014 as the deadline in the Euro area for replacing national credit transfers and direct debits with their SEPA equivalents. In member states with other currencies, the deadline is October 31st 2016.
Different time frame
Some countries need a different time frame for various payment products. The SEPA Regulation meets these needs in article 16, which is called ‘Transitional provisions’. Individual member states can opt for certain derogations and allow certain requirements specified within the SEPA Regulation to come into force at a later date. Members states had until February 1st 2013 to notify the Commission of any cases where they had decided to make use of a derogation as provided in paragraph 1, 3, 4, 5 or 6 of article 16:
Articles with the specific waivers:
16.1: Are payment service providers (PSPs) allowed to offer consumers conversion services to IBAN for national transactions until February 1st 2016?
16.3: Is there a waiver until February 1st 2016 for niche products?
16.4: Is there a waiver until February 1st 2016 for card payments resulting in a direct debit?
16.5: Is there a waiver until February 1st 2016 for use of the ISO 20022 XML format for individual credit transfers or direct debits that are bundled together for transmission?
16.6: Is there a waiver until February 1st 2016 allowing continued use of the PSPs Business Identified Code (BIC) for national credit transfers?
16.6: Is there a waiver until February 1st 2016 allowing continued use of the PSPs BIC for national direct debits?
The national banks of these countries have notified the Commission that a waiver is in effect:
16.1: Germany, Estonia, Spain, Cyprus, Portugal and Slovakia
16.3: Greece, Spain, France, Italy, Cyprus and Austria
16.4: Germany and Austria
16.5: Estonia, Greece, Spain, Italy, Cyprus, Portugal and Slovakia
16.6: Ireland, Greece, Cyprus, Malta and Portugal
Cyprus, Greece and Portugal have asked for four waivers. For example, The Central Bank of Portugal announced a waiver on the usage of the Customer to Bank flat format for credit transfer and direct debit and also on BIC in domestic transactions. This enriched new format is waived and is allowed to be used by corporates until February 1st 2016.
Estonia has asked for waivers on 16.1 and 16.5 for twelve months. If necessary, there will be a further extension up to twelve months. In France two payment services have been identified as niche products, with a combined market share of less than 1 per cent. Those are both waivered. Malta is applying derogation on article 16.6 for credit transfers and direct debits until February 1st 2016.