Dispute over rules for cross-border transfers

Date: 28/03/1996

By Fiona McHugh

THE battle between finance ministers and the European Parliament over the planned directive on cross-border payments underlines just how difficult it is proving to create a genuine single market in financial services.

A clash between the two now looks inevitable following the vote by MEPs at this month's plenary session in Strasbourg to broaden the scope of proposed rules governing transfers of money between member states.

Keen to limit the reach of the draft directive to small-scale bank transfers, ministers decided last year, after lengthy and difficult negotiations, that it should only apply to payments of less than 25,000 ecu for the first two years, and to those worth less than 30,000 ecu thereafter.

But the Parliament voted this month to raise the ceiling to 50,000 ecu, prompting an angry reaction from some member states.

“The Parliament's amendments are totally unacceptable to us. Most countries did not want to go above 25,000, so how on earth do they (MEPs) think we can accept 50,000?” said a German government spokesman.

MEP Karla Peijs, the Christian Democrat rapporteur on the directive, insists, however, that to raise the ceiling after two years would be “crazy”.

The Parliament was more conciliatory on the issue of maximum guaranteed refunds, deciding against raising the ceiling from 10,000 ecu to 50,000 - an option which would have been impossible for finance ministers to swallow. Instead, MEPs voted for a more realistic 20,000-ecu limit.

While there is a slim chance that the two institutions might be able to agree on that issue, they will almost certainly collide over the planned timetable for implementing the directive.

The assembly wants EU governments to transpose the directive into national law within 18 months, but ministers insist that member states need at least 30 months to put it into force. Peijs points out that if member states were given the long lead-in time suggested by ministers, then the bloc would probably have a single currency before it had a common system for cross-border payments.

The proposed directive, first suggested in 1994, is designed to force banks to speed up and reduce the cost of small cross-border payments. It came in the wake of a European Commission study which found that it took an average of 4.8 working days and cost an average of 25.4 ecu to transfer money to another member state, with huge variations in the cost and quality of money transfers leaving customers open to delays and over-charging.

The study also found evidence of double-charging, where both the recipient and the sender of the cash were charged for the same transaction, and of a lack of transparency in transfer services.

Banks had originally pressed for an optional arrangement, arguing that small transfers only accounted for a very small part of total payments and that companies could, if they so wished, negotiate deals with their banks.

The Commission gave them a chance to self-regulate, but lost patience when the system remained unchanged in spite of their pledges.

If governments fail to agree to the changes made by the assembly, MEPs will be forced into formal negotiations with ministers in conciliation meetings to try to resolve their differences.