Gent Sejko: Albania's participation process in the Single Euro
Payments Area
Address by Mr Gent Sejko, Governor of the Bank of Albania, at the Hearing of the
European Affairs Committee of the Albanian Parliament on the preparation of Albanian
institutions regarding Albania's participation process in the Single Euro Payments Area
(SEPA), Tirana, 17 July 2024.
* * *
Honourable Chair,
Honourable members of the Committee,
First of all, thank you for the invitation and the opportunity to share with you the work we
have dedicated to the first step towards the economic integration in the European
Union. This step regards to the official submission of Albania's application to the
European Payments Council, for participating in the Single Euro Payments Area, also
known as SEPA. The application was sent in June, as scheduled in the action plan.
Given the multi-dimensional importance of SEPA, I extend my gratitude for the
attention expressed by this Committee in the process of Albania's membership
into SEPA. Its successful finalisation will benefit from the support of all the
public institutions involved in the integration processes.
Before delving into more details regarding the application process, allow me to briefly
summarise its history and context. The work for Albania's participation in SEPA has
started in 2021, when the Bank of Albania became part of the regional project
"Payments modernization in the Western Balkans". This project originates from the
agreements achieved under Berlin Process and aims at developing financial and
economic relationships among Western Balkan countries, while simultaneously
integrating the region into the European Union. In November 2023, the European
Commission, to encouraging the efforts made by the countries to expand their
economic integration with the European market, included the accelerated participation
in SEPA in their priority agenda of regional enlargement. Previous assessments of
the World Bank experts showed that Albania was noticeably prepared to start the
application, since it fulfilled almost all the criteria. In particular, it was assessed
that Albania had made a significant progress regarding the alignment of its
payment legislation with that of the European Union. The commitment to start the
application for membership in SEPA was re-highlighted in the Ministerial as well: "The
Western Balkans toward the Single Euro Payments Area (SEPA)", which was held on
28 February of current year, where Albania expressed its dedication to submit the
application by June.
The Bank of Albania has led and coordinated the work for submitting the application.
However, to accomplish this task, the contribution and cooperation of other public
institutions, as per the requirements of the application, was necessary. I would like to
take a moment to thank all the institutions involved in the process for their utmost
engagement dedicated to this work, particularly the Ministry of Finances. The Bank of
Albania compiled an action plan, coordinated and cooperated with all the national
institutions involved in the process, while established bridges of communication
with the European Payments Council and the European Commission, in order to
address every arising during the process. The entire application process was
conducted through the valuable assistance of the World Bank.
Allow me to stress out that within less than 5 months, a voluminous and detailed
material was compiled, and all the stages of preliminary consultations with the
European Payments Council and the European Commission were successfully
completed thanks to this coordination and cooperation.
The criteria set forth by the European Payments Council for countries that apply to
participate in SEPA are concentrated in two aspects. First, the applicant should
demonstrate strong economic links with the European Union, and second, it should
demonstrate the alignment of its legislation with that of the European Unions in
but not exclusively. The latter has the largest volume in the
the area of payments,
application.
In the area of payments, Albania demonstrates a high legal compliance with the
Acquis and the regulatory framework of SEPA. Since 2018, Albania has
accelerated its efforts in this regard, through the drafting by the Bank of Albania
and the approval of the Law "On Payment Services" and the regulatory framework
for the implementation thereof. This law transposes the EU Directive on Payment
Services, known as PSD2. The approval of this law ensures that competition,
transparency and consumer protection are maintained during the provision of payment
services, following the standards of the European Union. In order to fully align the
regulatory framework of payments with the SEPA criteria, in March and April, the
Bank of Albania prepared and approved a new regulation, which transposes the
SEPA regulation. Alongside laying down certain harmonised standards, this regulation
gives the banking system the necessary time to prepare its infrastructure to adapt to the
SEPA schemes. Another aspect of legal compliance is related to the supervisory
practices of the banking system and the regulatory requirements on capital, which were
for the most part congruent to the EU legislation on the context of SEPA.
A delicate point in the application is the legal compliance as regards the
measures adopted for preventing money laundering and countering of terrorist
financing. The delisting of Albania from the "grey" list last year, removed a barrier that
prevented it from fulfilling the application criteria. Our legislation regarding money
laundering is assessed as generally compliant with the Acquis, although some legal
amendments are still necessary. We are in close contact with our colleagues at the
Financial Intelligence Agency, as we discuss how to address these issues which will
successfully support Albania's application.
However, allow me to highlight that a beneficial contribution originating from
participation in SEPA, besides the formalisation of the economy, is the possibility
to implement in a more rigorous manner money laundering. More concretely,
shortening the payment cycle and including fewer actors in this process, gives
lawabiding institutions the possibility to monitor more effectively. Furthermore, the practices
and standards of SEPA schemes implement the advanced communication standard
(ISO 20022) to create the necessary pre-conditions so that the monitoring of
transactions is rendered in a more effective manner.
Other legal aspects comprising the necessary criteria to participate in SEPA are related
to the protection of competition and personal data, free capital movement, taxation
according to international standards, private international rights, etc. The assessment of
relevant authorities, supported also by the conclusions of screening meetings, show
that our legislation is adequately aligned with the Acquis, in the context of SEPA.
Albania's application will be analysed by the European Payments Council, which
manages the SEPA schemes, as well as the European Commission. The latter
should agree to include Albania in the geographical scope of the SEPA schemes in the
context of integrating non-member countries in the European market, based on the
same rules and standards.
Participation in SEPA, beyond the political importance of the country's
integration in the European Union, brings a series of benefits for Albanian
consumers, businesses and the economy.
First, cross-border payments in Euro are conducted at the same costs with
national payments. This means cheaper and faster payments with the countries which
are SEPA members. Currently, transfers and payments with the European Union
countries and vice versa are conducted through correspondent banks. This is a costly
and inefficient channel in terms of: transaction execution time; monitoring of its
finalization; transparency of working conditions; and consumer protection. Through
SEPA, the costs of cross-border Euro payments with its member countries are at
a minimum 5 times lower. Most of cross-border financial transactions are
At the same
conducted with the EU countries - around 58% of goods' trading.
time, these countries ensure half of the stock of Foreign Direct Investments. There are
sizeable economic benefits from conducting payments which are more efficient
as regards costs, time and safety, and according to our preliminary assessments
they could reach up to EUR 20 million, in the first year, progressively increasing
thereafter.
In more concrete terms, based on the experience of AIPS Euro, through which the Bank
of Albania has saved the Albanian market EUR 50 million since its launching in January
2022, the impact from SEPA membership will be even broader.
Both projects aim to reduce fees on payments, however AIPS Euro targets Euro
payments conducted within the country, whereas SEPA will affect cross-border
payments. In this context, since the volume of cross-border transactions is manifold
compared to domestic ones due to tourism, trade and the close cooperation between
Albanian and European citizens, the impact base is broader and addresses the higher
fees charged on these types of payments from banks.
Second, the facilitation of cross-border payments with the European Union
boosts the expansion of trade relationships with the EU, the main trading partner of
Albania. By facilitating the conduction of transactions, Albanian businesses have
access to a large market, which could provide them the opportunity to expand their
services and products and increase competitiveness, ensuring European partners that
they are receiving what they get within the borders of the Union.
Third, almost all remittances come from EU countries and the UK, which is also a
The facility provided by SEPA will encourage the senders of
SEPA member.
remittances to use official channels, in addition to increasing the value of savings.
Fourth, SEPA participation promotes an efficient and reliable payment system for
small economies like Albania. As a payment market regulator, this is a desirable
objective of the Bank of Albania. Through standardising cross-border payments and
employing an advanced technology, it is possible to develop a more contemporary
payments market in accordance with European policies; one which supports
competition in the retail payments market, as well as transparency and trust on the
products offered to the public regarding cross-border payments.
Last, the use of SEPA payments is expected to bring a positive change in the
behaviour of Albanian companies and households as regards the methods for
carrying out electronic (cashless) payments. It serves as an educational instrument
which supports the expansion of financial inclusion of the population.
Even after the submission of the application, the Bank of Albania has continued its work
to comply with the regulatory framework and establish the technical conditions in
support of the process. Currently, we are discussing with the relevant institutions the
possibility to introduce some amendments to the regulatory framework as regards
the implementation of the Law on Payment Services and the adoption of
measures for the prevention of money laundering through cross-border
transfers. These amendments reflect the new regulations of the European Union
which have currently entered into force, or that will do so in the successive
months, and are relevant in the context of SEPA participation.
Upon the approval of Albania's participation in the geographical scope of SEPA,
our payment institutions should individually apply to participate in SEPA
schemes. The Bank of Albania has undertaken some initiatives as regards the
infrastructural developments necessary to facilitate the membership. It is important to
mention the project for improving our payment systems, aiming, among others to further
approximate with the ISO 20022 communication standards and the rules of conduct of
SEPA on transactions carried out domestically. The implementation of these standards
and regulations is a necessary preliminary condition as regards the technical criteria of
this market, when our payment institutions will join SEPA schemes. The market should
be prepared beforehand, therefore by making these standards mandatory on domestic
payments, market players will be well-prepared for SEPA membership. Also, the Bank
of Albania is in close contact with the Albanian Association of Banks, which will support
and guide banks to lay out the necessary infrastructure. As it was already mentioned,
upon getting the approval to join the geographical scope of SEPA, banks will be granted
the time necessary to prepare the technical conditions to carry out SEPA transfers.
However, I would like to highlight the fact that since some of the banks originate from
pan-European banks, the transition process needed to use these schemes will be faster
and more effective.
Another project of great importance related to SEPA, as well as the domestic
payments market, is the one regarding the implementation of the instant payment
infrastructure. In the international arena, these systems are becoming increasingly
important, as they allow the transfer of funds 24/7, using innovative methods, in the
domestic market, also for cross-border payments. Instant payments facilitate
crossborder trade, increase competition and reduce costs. In order to fulfil this project, which
started years ago, several analyses on the needs of the domestic market as well as the
interaction with the countries of the region and the EU, were carried out. We are
currently communicating with the Bank of Italy to adopt a system which will be
identical with the instant payments system that is run by the European Central
Bank. In this way, the system that we are aiming to adopt will be in compliance
with SEPA, and other systems operating in the EU.
In conclusion, I would like to reiterate that the Bank of Albania is fully committed to
continue its cooperation with the other institutions in order to successfully realise its
national objective. The Bank of Albania will take all the necessary measures as a
regulator to support the membership of Albanian payments institutions into SEPA and
their integration in the European markets.