ECB: we can make banks deliver

The European Payments Council (EPC) is working on the basis of two very important deadlines. The first is to have a Single Euro Payments Area (SEPA) for citizens from 1 January 2008.

The European Central Bank appreciates the great efforts made by the EPC to deliver the rulebooks on time for both the credit transfer and the SEPA direct-debit schemes and the agreement on the SEPA Cards Framework. These basic building blocks for SEPA were approved at the EPC plenary meeting that took place in June. During the autumn and winter, consultations with national banking communities will take place. It is expected that these schemes will be finally adopted in the March plenary meeting of the EPC. This would leave sufficient time for banks to prepare the implementation during the next two years.

The progress on concepts shows the commitment of the EPC to delivering SEPA on time. The ECB understands the difficulties that the EPC has had in achieving an agreement on such complex issues, as national practices will have to adapt to the new schemes and to the new framework defined for cards. Therefore the description of a roadmap for implementation is the next big step.

On the second deadline, by which national infrastructures should migrate to a pan-European payments infrastructure by the end of 2010, we are not so optimistic. There are still major open questions on whether the deadline originally set by the banking sector for SEPA completion in 2010 will be achieved. The majority of national communities expressed some reservations on the deadline, indicating that it is not compatible with their investment cycles.

Banking communities are to a certain degree reluctant to change their national practices and as a consequence the products delivered by the EPC are in some cases too general, allowing different implementations and also, in some cases, are limited to basic features. The EPC will have to make sure that after national consultations, the essence of the rulebooks and the SEPA Cards Framework is retained.

Implementation remains a challenge as there is still a lot of room for interpretation, either because several options remain open or because the EPC deliverables are limited to basic features. The ECB, together with the European Commission, will have to maintain the pressure on banks to ensure that this positive momentum is not lost.

One of the problems with how SEPA for citizens is treated by the banking industry is that the Eurosystem's stated objective (that banks would also have to deliver priority payments, ie same-day value) is currently outside the scope of the EPC.

The reason that the ECB insists strongly on priority payments being part of the SEPA delivery is the principle that SEPA should not lead to a deterioration of service levels in some countries. For example, if customers in Finland and Netherlands are used to same-day value payments, they will not accept that a SEPA credit transfer can only guarantee a three- day transfer. Moreover, backtracking on this principle in order to please certain banking communities would undermine the credibility of the Eurosystem from the perspective of users and the Commission.

Another issue that should not escape the EPC's responsibilities is the end-to-end processing of payments. In some cases, we fear that the EPC is focusing more on the interbank aspect and considers the service delivered to the final customer as an added-value service.

The ECB thinks that consolidation of infrastructure is an opportunity to reduce costs. Coming back to the 2010 deadline, the Eurosystem is in line with the EPC's objective that a critical mass of national credit transfers, direct debits and cards should be irreversibly migrated to SEPA instruments by 2010.

For infrastructures, we understand that a longer adjustment period is necessary to achieve the full benefits of economies of scale that will follow from consolidation. However, to set the stage for a market-driven consolidation it is essential that all euro area infrastructures are put in full competition with each other from 2010. The way to achieve this would be to demand complete interoperability between SEPA-compliant infrastructures.

In my view, a critical milestone for having European consolidation take place is a full integration of the payments infrastructures. The Eurosystem central banks are making a big effort to achieve integration in the large value field with the development of TARGET 2. I understand that now it is the turn of the banking industry to make the same efforts to achieve the same level of integration in retail payment instruments and infrastructures. There is no doubt that integration in the payments landscape is a prerequisite for further consolidation in the banking industry.

Until now, the ECB position has been to leave it to the banking industry to deliver SEPA. We understand that solutions have to be found to achieve SEPA while, in the end, the banking industry has to ensure that the payment business is profitable for them as a whole.

One form of intervention, which is stated in the EU treaty, permits the ECB to make regulations in this field. Another alternative would be to become operational. For the time being we are not considering any of these options, as we still trust in the capability of the EPC to deliver on this project.

I believe that 2008 and particularly 2010 are important milestones in which the deliverables of the banking industry would have to be assessed and possible modalities of intervention considered. Let us remain confident that results are visible by then.

• Gertrude Tumpel-Gugerell is a member of the executive board of the European Central Bank.

Major commentary feature in which the author, who is a member of the Executive Board of the European Central Bank, says that the ECB was planning to maintaining pressure on the banking sector to bring consumers the benefit of a Single Payments Area. Article is part of a European Voice Special Report, 'A Single European Payments Area'.

• Primary Source

ECB: Payments & Securities: Policy issues: Single euro payments area (SEPA) http://www.ecb.int/paym/pol/sepa/html/index.en.html

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