Last chance for cross-border payments plan

Date: 23/05/1996

By Fiona McHugh

FINANCE ministers and MEPs are bracing themselves for yet another fight over draft new rules designed to speed up bank transfers between member states.

Given the fact that arguments have dogged the European Commission's cross-border payments proposal since its birth in 1994, 'conciliation' meetings were always on the cards. Now they are on the horizon.

Next month, MEPs and ministers will come face to face at a series of formal meetings in a last-ditch attempt to bury their differences. Should they fail to agree, the proposed new rules will be scrapped.

The most contentious issue in the negotiations is likely to be the so-called money-back guarantee, which would force banks to refund customers when their money is lost in the system during a cross-border transaction. While both sides agree that such a guarantee is needed, they differ over the amount of cash the banks should be forced to hand back.

Restraining themselves from setting the guarantee level at 50,000 ecu, Euro MPs opted earlier this year for a more realistic 20,000-ecu ceiling. But even that figure is considered too high by the Council of Ministers which voted last year for a 10,000-ecu limit.

Both sides seem determined to stand their ground on this issue, making a clash inevitable.

“It was almost impossible to reach agreement on a 10,000-ecu guarantee in the Council, so there is no way we can agree to raise that ceiling,” insisted a German official.

An equally intransigent Karla Peijs, a Dutch MEP and parliamentary rapporteur for the proposal, commented: “We would be willing to compromise on certain issues, but not on the money-back guarantee.”

On a more optimistic note, the two institutions seem to be inching towards a compromise on the scope of the directive, with ministers agreeing to raise their ceiling to 35,000 ecu and the Parliament pledging to scale down its demands.

Keen to limit the reach of the draft directive to small-scale bank transfers, ministers decided last year 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 assembly voted to raise the ceiling to 50,000 ecu. However, it may now be willing to reduce this to 40,000 ecu.

Member states have hinted that they might also be willing to give ground on the timetable for implementing the directive. They originally wanted 30 months to transpose it into national law, but now seem willing to accept 24 months.

Peijs considers the 30-month lead-in to be ludicrous and points out that, were governments given such a long time to implement the directive, the bloc would probably have a single currency before it had a common system for cross-border payments.

The proposal at the centre of controversy, originally put forward in 1994, was designed to force banks to speed up and reduce the cost of small cross-border payments after a Commission study found that it took an average of 4.8 working days to transfer money and cost an average of 25.4 ecu.

Though the average figures were not particularly shocking, the study revealed that the cost and quality of money transfers varied hugely, leaving small-time customers open to long delays and over-charging.

The study also found evidence of double-charging and of a lack of transparency regarding transfer services.

Banks tried to convince the Commission of the virtues of an optional arrangement, arguing that small transfers only accounted for a very small part of total payments and that companies could, if they 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.

Europe's banks would no doubt be happy to see the conciliation talks fail and the proposed directive die an undignified death, but that, sources say, is unlikely to happen. Come what may, they insist, a deal will be struck. What it will look like is another matter.