Rough ride for cross-border payment laws

Date: 04/01/1996

MEPS and EU finance ministers are set for a confrontation this year over the scope of proposed new laws governing cross-border payments.

Ministers approved the draft directive, which sets a six-day deadline for transfers and insists on full disclosure of costs, some months ago, but only after they had limited its reach to small-scale bank transfers.

This has angered MEPs, who originally set the limit at 50,000 ecu and are likely to resist the governments' attempt to lower that ceiling to 25,000 ecu for the first two years and 30,000 thereafter.

The economic and monetary affairs committee is expected to vote on the draft directive in February, one month before the final parliamentary vote at its March plenary.

But Dutch MEP and rapporteur Karla Peijs has already made it clear that the directive, as amended by ministers, faces a rough ride in the Parliament.

“I think it is crazy to have a change in the ceiling after two years. If we cannot get the 50,000 limit, then we should start at the 30,000 one immediately,” she said.

The decision by ministers to set the maximum guaranteed refund at 10,000 ecu instead of 50,000 is also likely to run into opposition. “There will be some hard bargaining on this point and I anticipate we will finally agree on a 30,000-ecu guarantee,” said Peijs.

But the most sensitive issue of all is the planned implementation timetable.

Ministers want member states to be given 30 months to put the directive into force. But that, according to Peijs, is far too long.

“I think that it is ridiculous that we might have monetary union by 1999, but we will not have a system for making cross-border payments. I expect the Parliament will agree to a year at a push, but no longer,” she said.

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

Money transfers, usually made by banks sending money to corresponding banks in the destination country, vary hugely both in quality and cost.

The study also found evidence of systematic double-charging, where both the recipient and the sender of the cash were charged for the same transaction, and of poor quality information made available to the public on banks' transfer services.

Banks had pressed for an optional arrangement, arguing that small transfers only accounted for a very small part of total payments and that companies would be able to negotiate their own deals with banks advantageously.

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

The European Parliament shares legislative powers with the Council of Ministers on this issue.