MEP aims to restrict bank payments regime to Union

By Anna McLauchlin

Date: 11/05/06

European banks must reduce the amount of time it takes to make a debit or credit payment, but need only do so within the European Union's territory, according to a report from French centre-right MEP Jean-Paul Gauzes on the Single European Payments Area (SEPA).

His report on the Payment Services Directive (PSD), on which the European Parliament will base its discussions of the proposed law, will be presented to members of the European Commission and national governments today (11 May).

The draft PSD lays out the legal framework for payments as a basis for creating SEPA, which would make it as simple and as cheap for EU citizens to make payments elsewhere in the EU as it is in their home country.

Under the Commission's original plans, banks would have been responsible for the successful delivery of any payments both within the EU and from the EU to anywhere else in the world.

But Gauzes wants to limit the scope of the directive to the currencies and the geographical borders of the EU alone. "If we include the entire world it becomes horribly complicated, whereas limiting the scope to the European Union means that we can lay down serious rules that apply to the whole of the single market," he said.

He pointed out that the current state of the payments market did not justify a wider scope. Only 4% of European payments are currently made cross-border, and of these a tiny proportion is made outside the EU, he said.

The Frenchman has backed Internal Market Commissioner Charlie McCreevy's insistence that banks should be able to ensure that payments arrive anywhere in the EU the day after the transaction has been initiated, though he is ready to give an extra two years - until 2012 - for banks to comply.

Banks claim that the next-day deadline is unrealistic and are pushing for a three-day period to be imposed, but critics argue that their claim is a smokescreen for their wish to use those three days to profit from possession of the money.

Gauzes has also decided to leave in requirements for licensing other payment providers, such as the US's Western Union or Ebay's Paypal, but is demanding stricter rules that such providers would have to follow.

They would have to hold a minimum amount of risk capital and be regulated by the same regulator as the traditional banking industry.

European banks had criticised the Commission proposal as they claimed it was unfair that such providers could compete with banks on payment services without being subject to the same stringent risk laws.Fearing that including this part of the proposal might delay political agreement, Germany had proposed, in discussions between national capitals, stripping it out.

But Gauzes said that the discussion had moved on and that all sides now accepted that the non-banking operators would fall under the directive's scope. "This sort of establishment already exists in parts of the EU so it's a good time to regulate it," he said.

Gauzes said that he was confident that agreement between the Parliament and the Council of Ministers could be reached in first reading, which the banking industry argues is essential for meeting its self-imposed deadline of 2008 for creating a seamless operating system for payments in the euro area.

"I'm satisfied that this is a balanced proposal that the diverse stakeholders will be able to accept," he said.

MEPs on the Parliament's economic and monetary affairs committee will hold an initial exchange of views on the proposal on 30 May and a committee vote is expected in July.

Article anticipates the presentation, on 11 May 2006, of a report on the proposed Payment Services Directive, drafted by French MEP Jean-Paul Gauzes for the European Parliament.

European Commission: Prelex: COM(2005) 603, Proposal for a Directive … on payment services in the internal market, 1.12.05 http://ec.europa.eu/prelex/detail_dossier.cfm?CL=en&ReqId=0&DocType=COM&DocYear=2005&DocNum=0603

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