Don’t bank on euro-transfer report, says Commission

By Tim King

Date: 29/07/04

THE European Commission has put off to next year an assessment of the effects of its controversial regulation on the cross-border transfer of euro.

The regulation introduced the principle of equal charges for domestic and cross-border payments, coming into force on 1 July 2002 for bank cards and cash machine withdrawal, and on 1 July 2003 for bank transfers.

The Internal Market Commissioner, Frits Bolkestein, sought through the regulation to drive down the cost of cross-border transfers. But there were reports of some perverse effects, with banks choosing to raise charges on domestic transactions rather than lower charges on foreign transfers.

The legislation envisages that "not later than 1 July 2004 the Commission should present a report on the application of this regulation".

But Commission officials say that the report will not be produced until next year. Other measures, including steps to counter the funding of terrorism, and on developing the European single-payment area, have taken priority, they say.

Dominique Forest, economic advisor at the European consumers' organization, BEUC, said it still wanted the Commission to follow up the implementation of the regulation.

BEUC has found that there are persistent problems, particularly where a customer transferring money chooses to take on any charges rather than to share them with the recipient.

Choosing this option, known as the "our" option, is deemed by some banks to be different from the former style of transfer, which appeared to share the charges even though in practice they were usually borne by the sender rather than the recipient.

"It is clear in Italy for instance," Forest said, "that the banking sector is charging you more if you choose the "our" option. This is not in line with the interpretation of the regulation published by the European Commission late last year." BEUC is planning a further follow-up report this Autumn.

Despite the consumer claims, an expert at the Brussels-based European Banking Federation said "most banks are playing the game by the rules".

He said there were isolated cases of banks over-charging consumers. But he said some customers were also abusing the system. The law applies to inter-bank transfers of €1,250 or less. However, some customers with far larger sums to shift between banks were making multiple transfers of smaller amounts.

European Commission: DG Internal Market and Services: Free movement of services: Financial Services: Payment services: Cross-border payments in euro http://ec.europa.eu/comm/internal_market/payments/crossborder/index_en.htm

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