Explanatory Memorandum to COM(2001)439 - Cross-border payments in euro - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2001)439 - Cross-border payments in euro. |
|---|---|
| source | COM(2001)439  |
| date | 26-07-2001 |
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52001PC0439
Proposal for a Regulation of the European Parliament and of the Council on cross-border payments in euro /* COM/2001/0439 final - COD 2001/0174 */
Official Journal 270 E , 25/09/2001 P. 0270 - 0272
Contents
- Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on cross-border payments in euro
- 1. general remarks
- 2. Background
- 3. Euro-payment area: the concept
- 4. Proposal in the Regulation
- Description of the Articles
- Article 2 - Definitions
- Article 3 - Charges for Cross-Border Payments
- Article 4 - Transparency of Charges
- Article 5 - Measures for facilitating cross-border payments
- Article 6 - Obligations of the Member States
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on cross-border payments in euro
(presented by the Commission)
E|X|PLANATORY MEMORANDUM
On 1 January 2002, much of Europe will undergo the greatest currency changeover in its history. It is a massive logistical challenge too. Around 15 billion notes and 50 billion coins in euro must be introduced in the space of a few weeks replacing a broadly equivalent quantity of national coins and notes in 12 different countries, for the benefit of around 300 million European citizens .
This introduction of coins and notes is the last stage of a process initiated on 1 January 1999 with the creation of the euro. But while the citizen will become aware that the single currency exists as euro coins and notes start to appear, other means of payment will appear unchanged: sending euro payments cross-border will cost much more than transferring euro within national boundaries. The creation of the single currency has not been accompanied by the establishment of a single-payment area.
The purpose of this Regulation is to reduce bank charges for cross-border payments in euro to a level in line with those applying at national level. This delivers on a longstanding policy of the European Commission. Most importantly, it will at last enable individual European consumers to become active participants in the Internal Market, ensuring that individual consumers are able to benefit from increased price transparency and choice.
In 1990, the Commission published its first general document on the operation of payment systems within the framework of the Internal Market i. This document reported that while payment systems function relatively well inside each country, they function badly on a cross-border basis. This 'border effect' in payment systems prevents the consumer from benefiting from the opportunities of the single Internal Market. At that date, the euro was still at the project stage. In 2002, the situation will be transformed.
In 1994, the Commission published a Communication on the cross-border transfer of funds which contained two important texts: a preliminary draft proposal for a Directive which subsequently became Directive 97/5/EC and a draft Communication on the application of competition rules to this type of transfers i.
In January 2000, the Commission published a new Communication entitled 'Retail payments in the Internal Market', the conclusion of which was:
"This Communication has indicated the actions to be undertaken, within the area of retail payments, in order to meet the needs - and expectations - of citizens and SMEs for a 'single-payment area': i.e. so they can make small-value payments across borders nearly as easily and cheaply as they can within their own countries. Both the private and public sector have their respective roles to play. The Commission will keep the Parliament and the Council regularly informed of progress on the issues discussed in this Communication."
The Commission adopted on 3 April 2001 a Communication i on the introduction of euro coins and notes. This document raised as a major concern the fact that cross-border payments in euro will remain more expensive than national payments. The Communication indicates: 'The Commission will consider using all the instruments at its disposal and will take all the steps necessary to ensure that the costs of cross-border transactions are brought more closely into line with the costs of domestic transactions on 1 January 2002'.
Each country has built its own system of retail payments. These various national systems function rather well. But as soon as a small-value payment is made cross-border, the costs for the customer become disproportionate. Various studies show that in 2001, the average price of a cross-border transfer of EUR 100 in the Union remains higher than EUR 20 .
In 2002, the consumer will also discover that the use of an ATM ("Automated Teller Machine") in his country costs almost nothing, but is very expensive as soon as he crosses a border. However, in both cases, this involves the same notes in euro. This situation holds regardless of the means of payment. In each of the 12 existing national payment areas, the cost of the operation is the same if the payment crosses a street in the capital or goes between cities or towns. This principle of a single-payment area must be established for the euro area: the euro must drive the transition from 12 national areas to a single 'domestic European area'.
The Regulation proposes that the price of a cross-border payment operation in euro within the European Union should not be different from that of national operations (the removal of the border effect). The objective is to improve the functioning of the Internal Market by encouraging the technical operators of the market to establish the infrastructure, the standards and the commercial agreements essential for the smooth operation of a single-payment area. This alignment of charges for cross-border payments with those for payments at national level should not lead to a higher level of charges for payments at national level.
The Regulation contains a number of measures intended to facilitate these operations, such as the obligatory use of certain standards or the prohibition of declaratory obligations.
Article 1 - scope
The Regulation applies to charges for all non-cash means of cross-border payments in euro within the Internal Market. It establishes the principle that banks can no longer levy different charges for cross-border payments in euro and for corresponding payments at national level.
The Regulation applies to cross-border payments up to EUR 50 000, but not beyond. This threshold has also been used in the cross-border credit transfers Directive and aims at covering retail payments. The Regulation therefore applies to the majority of payments effected by consumers and SMEs.
Article 2 defines institutions as they are the main addressees of the Regulation: they are the institutions which execute cross-border payments and which levy charges for their services.
Furthermore, Article 2 defines the different payment instruments as well as the payment transactions covered by the Regulation. These are all non-cash, instantly due, means of payment.
The definition of a cheque is given as being a means of payment under the scope of the Geneva Convention of 1931. These means of payment become cross-border when the two banks involved are located in two different countries.
None of these definitions, except that for cheques, have been newly introduced by the Regulation; the definitions used are consistent with those in existing Community legal acts.
Article 3 lays down the principle of equal charges. The provision does not prevent banks from charging for their payment services, or even from applying different charges for different customers; it stipulates, however, that a given customer must be charged the same fees for his payments in euro up to EUR 50 000 within the Internal Market, irrespective of whether these payments are made cross-border or at national level. In the case of payment by card, the fees paid by the retailer and the fees paid by the cardholder are both covered. The amount has to be the same as for a national operation.
The Regulation applies to payments in euro. The alignment of charges for all payments effected in the Single Currency will strengthen confidence of the European citizens in the euro.
The Regulation applies to all Member States of the European Union, not just to Members of the euro-zone. This wider scope might positively affect public opinion in Member States which are presently not (yet) members of the euro-zone.
The Regulation will take effect as from 1 January 2002 for electronic payment transactions. In practice, it is mainly payment by card and withdrawal from automatic teller machines.
For cross-border credit transfers and cheques, it is technically very difficult to meet the 1 January 2002 deadline: a transitional period to align prices is granted for these payments: charges for cross-border and domestic payments have to be set at the same level by 1 January 2003 at the latest for payments up to EUR 50 000.
Article 4 stipulates that customers have to receive prior information from the institution carrying out the payment as to what charges are applied for cross-border and domestic payments. This will allow customers to immediately compare charges. Any modification of tariffs will also have to be communicated to the customer.
As the Regulation also applies to cross-border payments in euro from or to Member States which are not part of the euro-zone, Article 4 also contains obligations to give information concerning the charges in connection with currency exchange. This will allow distinction to be made between charges due to the currency exchange and between charges levied for the payment as such.
The main reason for the high charges for cross-border payments is the lack of automation and the need for costly manual handling due to technical and administrative reasons. The Regulation therefore introduces certain measures in order to provide the conditions for fully automated straight-through-processed payments.
The International Bank Account Number (IBAN) and the Bank Identifier Code (BIC) constitute an important element towards such fully automated payments, similar to the degree of automation existing at national level. IBAN and BIC are new international ISO-standards for cross-border payments. They allow automated payments, without any costly and time-consuming manual handling.
Article 5 stipulates the obligation of institutions to communicate to their customers IBAN and BIC. However, the Regulation also obliges customers to use these new standards and to provide - upon request - IBAN and BIC before ordering a cross-border credit transfer.
Both the first and the second paragraphs are facultative since not all consumers necessarily make cross-border payments and since there may be other efficient cross-border payment systems which do not rely on IBAN and BIC. Nevertheless, it seems to be appropriate to require imperatively that customer's statements of accounts should always mention the IBAN and BIC or that commercial companies which target markets in other Member States should inform the customers about the IBAN and BIC, e.g. on their website, invoice or in a similar way, in order to facilitate cross-border payments.
Another reason for costly manual handling and hence high charges has been the obligation imposed on institutions by Member States to report cross-border payments for balance-of-payment statistics. Article 6 of the Regulation removes these reporting obligations for cross-border payments within the scope of the Regulation up to EUR 12 500 by 1 January 2002. From 1 January 2004, this amount becomes EUR 50 000.
Different Member States impose different minimum information obligations for the execution of cross-border payments (e.g. obligations in respect to the data of a beneficiary, most request the indication of the account number and others also the indication of the address; obligation to indicate the address of the receiving bank). These differences contribute to difficulties and time-consuming manual interventions. Article 6 stipulates the harmonisation of the necessary minimum information.