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    End date legislation – the final SEPA challenge!

    Published on 2010-12-17 11:34

    Below the Benche member, Björn Flismark, writes about the latest regarding SEPA End Date Regulation.

    The EU Commission have now presented the proposal for a SEPA End date Regulation. This is the final challenge for the banking industry and customers on the Road to SEPA. The purpose of the Regulation is that the migration to SEPA should be concluded.

    Over the next 6 months the proposal will be discussed and then adopted by the European Parliament and the Council in mid 2011 and the Regulation could enter into force a few months later.

    The End date Regulation has a number of important objectives:

    • The migration to SEPA will be finalised. All old domestic Euro payment types will be phased out. Over the next couple of years a true Single Euro Payments Area will be realised – the same payment type will be used for all domestic and cross-border euro payments and direct debits.

    • End dates will be established for legacy credit transfers and direct debits. The end date for Credit Transfers will be 12 months after the adoption of the Regulation and for Direct Debit 24 month after adoption. After these dates the legacy payment types can not be used.)

    • IBAN and BIC will be the only account identifiers that can be used.

    • Efficiency is being promoted, by making ISO 20022 XML standard mandatory. This standard will also be mandatory for customers that send or receive bulk files.

    • The Regulation has been tailored on the EPC Rulebooks but additional rules are being introduced. In particular these rules focus on customer protection in Direct Debits. This means that all banks have additional work to do in order to be compliant with the Regulation.

    The focus of the legislation is on Credit transfers and Direct debits. Other payment types like cards and cash are not covered by the legislation.

    The geographic scope is EU and EEA. Non-Euro countries will be affected for the Euro transactions they execute, but there will be four year period for preparation.

    The timetable will be very challenging and all stakeholders will have to start planning how to prepare.
     
    Comments 3 Comments
    1. Niclas Osmund's Avatar
      Niclas Osmund - 2011-01-10
      Hi Björn,
      This is really interesting and it means that todays legacy payment types would be non-usable already at year end 2012. And, it raises a number of questions around banks ability to adopt. - Do you think that this period of time will be sufficient for all banks to migrate to the new payemnt types? - What do you think will happen in the banking market? - Will we see large Payment Service Providers emerging and smaller/medium sized banks joining forces with these large PSP's? - Will all banks have the capacity to invest as much as needed and if they don't what will be the result?
      Would be really interesting to learn your veiws on these questions.
      Best regards,
      Niclas
    1. ktpama's Avatar
      ktpama - 2011-01-12
      " Efficiency is being promoted, by making ISO 20022 XML standard mandatory. This standard will also be mandatory for customers that send or receive bulk files."

      I believe this will really be The Challenge, because it affects not only banks but also all ERP and banking application systems that have a role in creating the payment material that will be sent to the bank; in order that the migration is possible, all parts in the chain need to be up to date technically, and only after that the customer can be migrated from local legacy format to the ISO 20022 XML. Also, this change concerns not only SEPA payments, but also all other payment types should be covered by ISO20022 XML.

      Problem is not SAP or other big ERPs as they already now support ISO 20022 at least for SCTs (perhaps partly because in Finland ISO 20022 migration should be done by end of October 2011) but it's probably the smaller (local) ones, that are plenty.

      Another question is, will there be a rush for AOSs, as SEPA countries try to adopt SCT for their domestic needs.
    1. nickwellesley's Avatar
      nickwellesley - 2011-02-07
      The whitepaper "SEPA: a new era has begun" from Deutsche Bank provides an interesting perspective on this subject: SEPA: a new era has begun | FX-MM