# EUR-Lex - 52013PC0937 - EN

*|*

# 52013PC0937

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) N° 260/2012 as regards the migration to Union-wide credit transfers and direct debits /* COM/2013/0937 final - 2013/0449 (COD) */**

			*

			*

EXPLANATORY MEMORANDUM

1. Context of the proposal

Grounds and objectives of the proposal

Regulation
(EU) No 260/2012 establishes common technical and business requirements for
credit transfers and direct debits in euro and as such is an important building
block in the realisation of a single euro payments area (SEPA). That
Regulation  sets 1 February 2014 as the end-date in the Eurozone for the
migration of domestic as well as intra-European credit transfers and direct
debits in euros towards SEPA credit transfers (SCT) and SEPA direct debits
(SDD).

According to the latest statistics of the European
Central Bank (ECB), the overall migration rate in the euro area for SEPA Credit
Transfers (SCT) has increased from 59.87% in October 2013 to 64.1% in November,
whereas the overall migration rate for SEPA Direct Debits (SDD) has increased
from 11.52% in October to 26% in November. Notwithstanding the Commission's
repeated efforts to raise awareness among Member States' competent authorities,
and the significant campaigning efforts as regards SEPA migration undertaken by
the European Central Bank and in many Member States, SMEs, small public
administrations and local authorities continue to be the least prepared for
actual migration. The communication efforts by the banking industry vis-à-vis
SMEs and national information campaigns do not seem to have produced the
expected effects or at least not to the expected extent.

Considering the low migration pace in some
Member States for SCT and in most Member States for SDD, it appears very
unlikely that the SEPA migration will be fully completed on 1 February 2014. However,
in view of this legal end-date, banks and other payment service providers are
likely to refuse from that date onwards to process legacy payments which are
not SEPA compliant. In the absence of full migration to SCT/SDD, payment
incidents leading to delays in payment or market disruptions cannot be
excluded. These might affect all payment services users, and particularly SMEs
and consumers.

Given this major legal problem and the
potentially severe consequences for citizens and companies, the Commission
proposes to amend Regulation (EU) No 260/2012 by introducing a grandfathering
clause allowing banks and other payment service providers to continue also
after 1 February 2014, for a limited period of time of 6 months, the processing
of non-compliant payments through their legacy payments schemes alongside SCT
and SDD. A clear communication of such amendment will provide certainty to the
payment service users that their payments will continue to be processed after 1
February 2014, and it will allow those that have not yet migrated to do so as
rapidly as possible. The end-date itself is not amended, and the grandfathering
is an exceptional one-off measure. Under all circumstances, on-going
information campaigns on the SEPA migration should continue. At the end of the
grandfathering period, the Commission will not hesitate to take the necessary
steps to ensure the full application of EU law by the Member States.

Participants of the SEPA High Level meeting
which brings together high level representatives from the European Central Bank
and board members of the central banks of the Eurosystem have been consulted on
this initiative on 19 December 2013.

In view of the above and given the very
short period of time left before 1 February 2014, this Regulation should be
adopted by the European Parliament and the Council as a matter of urgency and
enter into force without delay. The Regulation is necessary in order to avoid
legal uncertainty for banks and other payment service providers, as well as
undertakings and consumers, as Regulation (EU) No. 260/2012 would oblige
payment service providers to refuse to process after this end-date payments in
euro that are not compliant with the SEPA requirements. Not adopting the
proposed Regulation as a matter of urgency could result in serious legal and
technical risks in payments transactions from 1 February 2014 onwards.

General context

Regulation (EU) No 260/2012 entered into force
on 31 March 2012, giving market participants two years to adapt their payment
processes to the SEPA requirements for SCT and SDD. During those two years, the
Commission and the ECB, together with the national public authorities have
closely monitored the progress of SEPA migration. The ECB has regularly issued
progress reports on the progress of the SEPA migration. Several SEPA Council
meetings have taken place, in which the Commission discussed the migration
progress with representatives from both the supply and demand side of the payments
market, insisting on the need to intensify communication towards payment
service providers as well as towards all categories of payment services users
(corporates including SMEs, public administrations, consumers, etc.). On 30
March 2012, the Commission organised a dedicated workshop on the interpretation
of Regulation (EU) No 260/2012 with SEPA Council technical experts, and again
on 12 July 2013 with Member States representatives. On 17 April 2013, the
Commission also organised a technical expert group on SEPA. The Commission has furthermore
discussed the progress both in the EU SEPA Forum that takes place twice a year,
and the Payments Committee with Member States representatives. SEPA migration
has regularly featured on the agenda of many technical meetings of the ECB with
representatives of national central banks, as well as in some fora with
representatives from the banking industry.

In view of the low migration rates
published by the ECB in its March 2013 report on SEPA migration, the ECOFIN
Council of 14 May 2013 adopted comprehensive Council conclusions stressing the
importance of SEPA migration and calling on Member States and market
participants to actively support and speed up the SEPA migration process by taking
relevant measures. Following the ECOFIN conclusions, a joint letter of the
Commission and the ECB was sent to Ministers of Finance and Governors of
national central banks on 15 May 2013, also stressing the importance of SEPA
migration and the urgent need for action at national level.

2. Results of consultations with
interested parties and impact assessments

2.1. Transmission of this proposal to
the national parliaments

Draft legislative acts, including proposals
from the Commission, sent to the European Parliament and to the Council must be
forwarded to national parliaments in accordance with the Protocol (No. 1) on
the role of national Parliaments in the European Union, annexed to the
Treaties.

According to Article 4 of the Protocol, an
eight-week period must elapse between a draft legislative act being made
available to national Parliaments and the date when it is placed on a
provisional agenda for the Council for its adoption or for adoption of a
position under a legislative procedure.

However, exceptions are possible under
Article 4 in cases of urgency, the reasons for which must be stated in the act
or position of the Council. The Commission invites the European Parliament and
the Council to consider this proposal as a case of absolute urgency for the
reasons explained above.

2.2. Consultation of other interested
parties and impact assessment

In view of the low migration rates,
published by the ECB in December 2013, the Commission and the ECB have analysed
the likelihood that the SEPA migration would be fully completed on 1 February
2014. It was acknowledged that this would be highly unlikely despite the fact
that several big payment services users, such as utility companies with bulk
payments, have indicated that they are planning to migrate close to the end
date.

Although it is difficult to provide an
estimation of the number of market participants that will not be SEPA compliant
by the legal end-date, it is clear that in particular in the area of SDD the
migration rates will not anywhere be close to 100%.

Banks and other payment service providers
are likely to refuse to process non-compliant SEPA payments as of 1 February
2014. The largest non-migration risk is related to SMEs many of which have not
yet migrated. In light of this risk, the ECB has analysed possible scenarios
and their impact with possible solutions to remedy the situation. Technically,
payment service providers would be able to continue with the processing of
non-compliant payments through the use of legacy schemes. In addition, market
participants that are not yet SEPA compliant would need to be identified and be
informed adequately on how to migrate to SEPA in an efficient manner.

Even though it may be technically feasible
for market participants with the support of the overseers to implement
intermediate solutions to overcome potential migration issues after 1 February
2014, there is a genuine risk that this unsatisfactory situation may lead to
confusion for both consumers and other payment service users, and legal
uncertainty for payment service providers confronted with market participants
that have not (yet) implemented these intermediate solutions. Among the
non-compliant market participants there are many SMEs. The fact that their
legacy payments may not be processed by the banks after 1 February 2014 could
also cause reputational damage to the Euro system as a whole. It is unlikely
that intermediate solutions, even if technically feasible, will be implemented
in time.

In order to avoid unnecessary payment
disruptions resulting from non-compliance with SEPA and to ensure legal
certainty for all market participants, the Commission considers it justified to
propose to allow, after 1 February 2014, the co-existence of national legacy
systems next to SCT and SDD schemes for a limited period of time of 6 months.
The length of such transitional period should be proportionate. The aim would
be to uphold the pressure on market participants to migrate as soon as
possible, while at the same time ensuring legal certainty and that the costs
for payment service providers of a continued parallel run of two payment
systems is limited. Those payment service providers that have already migrated
to SCT and SDD may consider providing conversion services to market
participants that have not yet migrated. During the transitional period, Member
States should refrain from applying penalties to payment service providers that
process non-compliant payments and to payment service users that have not yet
(fully) migrated.

The introduction of an exceptional and
one-off additional period during which processing of legacy payments will be
tolerated will also allow for a gradual migration. In view of the approaching
deadline, several of the larger utility providers have indicated that they will
migrate close to the current end-date of 1 February 2014. This may create
certain bottlenecks, particularly at the level of the payment service providers
and the software vendors, who may be faced with certain capacity constraints.

Considering the current migration figures
and the expected pace of migration, a grandfathering period of 6 months, until
1 August 2014, is considered appropriate. During this period, the Commission
and the ECB, together with national authorities will continue to monitor the
migration process closely and will be ready to take any additional measures, as
appropriate.

This proposal is not accompanied by a
separate Impact Assessment, as an impact assessment for Regulation (EU) No.
260/2012 has already been undertaken. This proposal does not alter the
Regulation on substance and does not impose new obligations on businesses. It
only aims at introducing a transitional period after the end-date defined in
Article 6(1) and (2) of the Regulation to avoid legal uncertainty for
supervisory authorities, payment service providers, undertakings and consumers.

3. Legal elements of the proposal

The Commission proposes to amend Regulation
(EU) No 260/2012 by introducing a "grandfathering" clause which will
allow banks and other payment service providers to continue until 1 August 2014
the processing of non-compliant payments through their currently existing
legacy payments schemes, alongside SCT and SDD. This amendment ensures that
market participants that are not ready for SEPA by 1 February 2014 can continue
to make their payments and avoids any inconvenience for consumers.

The proposal provides that the amendment
applies as of 31 January 2014. This provision also allows for a retro-active
application in case the proposal is not adopted by the European Parliament and
the Council before 1 February but just after this date. This will avoid a
legislative gap as of 1 February 2014 which would create legal uncertainty.

The introduction of this transitional
period for the phasing-out of the old systems shall be considered as an
exceptional measure which will not be extended any further. Without prejudice
to the different exemptions set out in Article 16 of Regulation (EU) No.
260/2012, all market participants shall therefore comply with the SEPA
requirements by 1 August 2014.

4. Budgetary implications

The regulation does not have a budgetary
impact for the Commission.

2013/0449 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

amending Regulation (EU) N° 260/2012 as
regards the migration to Union-wide credit transfers and direct debits

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[1],

Having regard to the opinion of the
European Central Bank[2]

Acting in accordance with the ordinary
legislative procedure[3],

Whereas:

(1)       Together with Regulation
(EC) No 924/2009 of the European Parliament and of the Council[4]Regulation (EU) No
260/2012 of the European Parliament and of the Council[5] constitutes an
important building block in the completion of a single euro payments area
(SEPA), where no distinction between cross-border and national payments in euro
is made. The main objective of Regulation (EU) No 260/2012 is the migration
from national credit transfer and direct debit schemes to harmonized SEPA
credit transfer (SCT) and SEPA direct debit (SDD) schemes, inter alia by
providing Union citizens with a unique international bank account number (IBAN)
that can be used for all SEPA credit transfers and direct debit transactions
denominated in euro.

(2)       Regulation (EU) No
260/2012 has provided for the SEPA migration to take place by 1 February 2014
in order to allow payment service providers and payment service users
sufficient time to adapt their processes to the technical requirements that the
migration to SCT and SDD entail.

(3)       Since the adoption of
Regulation (EU) No 260/2012 the Commission and the European Central Bank have
closely monitored the progress of SEPA migration. Several meetings with Member
States, national public authorities and market participants were held. The
European Central Bank has regularly published progress reports on SEPA
migration on the basis of payment data collected by national central banks. Those
reports indicate that a number of Member States in the euro area are well on
track with migration rates for SCT currently close to 100%. The large majority
of payment service providers reported that they are already SEPA-compliant.
However, in several other Member States the migration rates are lagging behind
expectations. This is particularly the case for SDD.

(4)       On May 2013, the ECOFIN
Council in its conclusions[6]
again stressed the importance of SEPA migration. It was noted that the SEPA
migration was far from complete and that immediate efforts would be required by
all market participants to complete the SEPA migration in time. An action plan
was adopted in which merchants, corporates, SMEs and public administrations
were invited to immediately take the necessary concrete internal steps to adapt
their processes and inform their clients of their IBAN details.

(5)       Despite the considerable
efforts made by the European Central Bank, Member States, their national public
authorities and the different market participants during the past months, the
latest migration statistics show that the overall migration rate in the euro
area to SEPA Credit Transfers (SCT) has only increased from 40% in June to around
64% in November, while the overall migration rate towards SEPA Direct Debits (SDD)
has only reached 26%. While the national figures show important progress in
several Member States, there is still an important group of Member States
lagging considerably behind the expected migration rates. In view of the
current low migration pace in those Member States it is therefore very unlikely
that all market participants will be SEPA compliant by 1 February 2014.

(6)       As of 1 February 2014
banks and other payment service providers will have to refuse to accept
processing credit transfers or direct debits that are not SEPA-compliant
because of their legal obligations, although, as is currently already the case,
they technically could process those payments by continuing to use existing legacy
payments schemes alongside SCT and SDD. Failing a full migration to SCT and
SDD, incidents involving payments leading to delays in those payments cannot be
excluded. All payment services users and particularly SMEs and consumers could
be affected.

(7)       It is essential to avoid
unnecessary disruption of payments resulting from the fact that SEPA migration
is not fully completed by 1 February 2014. Payment service providers should
therefore be allowed, for a limited period of time, to continue the processing
of payments transactions through their legacy schemes alongside their SCT and
SDD schemes, as they are doing now. A transition period should therefore be
introduced that allows for the continuation of such parallel processing of
payments in different formats. Considering the current migration figures and the
expected pace of migration, a one-off additional transition period of 6 months
is appropriate. This grandfathering of the non-SEPA compliant legacy systems
should be considered as an exceptional measure and therefore be kept as short
as possible, as a rapid and comprehensive migration is necessary in order to
achieve the full benefits from an integrated payments market. It is also
important to limit in time the costs for the payment service providers of a
continued use of the legacy payment schemes in parallel with the SEPA system. Payment
service providers that have already fully migrated to SEPA might consider
providing payment service users that not yet have migrated with conversion
services during this transition period. During the transitional period, Member
States should refrain from applying penalties to payment service providers that
process non-compliant payments and to payment service users that have not yet
migrated.

(8)       Several large users of
direct debit instruments have already indicated that they plan to migrate close
to the end-date. Any postponing of those migration projects could lead to
temporary stress on incoming payments and cash flows, and hence on treasury
levels of the companies concerned. Such late migration on a large scale could also
create certain bottlenecks, in particular at the level of banks and software
vendors who may be faced with certain capacity constraints. That additional
period for phasing in the new system would allow for a more gradual approach.
Market participants that have not yet started to implement the necessary
adaptations for SEPA compliance are called upon to do so as soon as possible.
Market participants that have already started to adapt their payment processes should
nevertheless complete the migration as rapidly as possible.

(9)       In view of the overall
objective to realise a coordinated and integrated migration, it is appropriate
that the transitional period applies to both SCT and SDD. Different
transitional periods for SCT and SDD would cause confusion for consumers,
payment service providers, SMEs as well as other payment service users.

(10)     For reasons of legal
certainty and in order to avoid any discontinuity to the application of
Regulation (EU) No 260/2012 it is necessary that this Regulation enters into
force as a matter of urgency and that it applies from 31 January 2014.

(11)     Regulation (EU) No 260/2012
should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

In Article 16 of Regulation (EU) No
260/2012, paragraph 1 is replaced by the following:

"1.Notwithstanding Article 6(1) and (2),
PSPs may continue, until 1 August 2014, to process payment transactions in euro
in formats that are different from those required for SEPA credit transfers and
SEPA direct debits.

Member States shall apply the rules on the
penalties applicable to infringements of Article 6(1) and (2), laid down in
accordance with Article 11, only as of 2 August 2014.

By way of derogation from Article 6(1) and (2),
Member States may allow PSPs to provide PSUs, until 1 February 2016, with
conversion services for national payment enabling PSUs that are consumers to
continue using BBAN instead of the payment account identifier specified in
point (1)(a) of the Annex on condition that interoperability is ensured by converting
the payer’s and the payee’s BBAN technically and securely into the respective
payment account identifier specified in point (1)(a) of the Annex. That payment
account identifier shall be delivered to the initiating PSU, where appropriate
before the payment is executed. In such a case PSPs shall not levy any charges
or other fees on the PSU directly or indirectly linked to those conversion
services."

Article 2

This Regulation shall enter into force on
the day of its publication in the Official Journal of the European Union.

It shall apply from 31 January
2014.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                        For
the Council

The President                                                 The
President

[1]               OJ C , , p. .

[2]               OJ C,  , p.   .

[3]

[4]               Regulation (EC) No 924/2009 of the European
Parliament and of the Council of 16 September 2009 on cross-border payments in
the Community and repealing Regulation (EC) No 2560/2001 (0J L 266, 9.10.2009,
p. 11).

[5]               Regulation (EU) No 260/2012 of the European
Parliament and of the Council of 14 March 2012 establishing technical and
business requirements for credit transfers and direct debits in euro and
amending Regulation (EC) No 924/2009 (OJ L 94, 30.3.2012, p. 22).

[6]               http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137122.pdf