Opinion on EU Funds Transfers: Transparency, Performance and Stability (95/C 236/01)

On 13 December 1994 the Council decided to consult the Economic and Social Committee under Article 100A of the Treaty establishing the European Community, on EU Funds Transfers: Transparency, Performance and Stability.

The Section for Economic, Financial and Monetary Questions, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 16 May 1995. The Rapporteur was Mr Burani.

At its 326th Plenary Session (meeting of 1 June 1995), the Economic and Social Committee adopted the following Opinion unanimously.

1. Introduction

1.1. The ESC has commented repeatedly on the subject covered by the present Communication, most recently () in its Opinion of 6 July 1994. The terms of the problems have not changed substantially since July. However, further consideration is necessitated by the development of the Commission's approach.

1.2. The present Commission document is essentially made up of:

- a very exhaustive introductory report on the whole problem;

- a Draft Directive of the European Parliament and Council on cross-border transfers;

- a draft notice on the application of the EC competition rules to cross-border transfer systems.

1.3. This Opinion examines the Draft Directive and the draft notice.

2. Background

2.1. As early as 1990, the Commission had pointed out that transfers of funds from one EU country to another were subject to delays, that the conditions were not transparent, and that the practice of double charging of fees and costs was too widespread. A Recommendation () laid down principles which the banks were called upon to respect.

2.2. The implementation of the Recommendation was discussed by two groups, one concerned with the technical development of systems (PSTDG) and the other with liaison between users and banks (PSULG), whose work resulted initially in the adoption of 'Industry Guidelines' which the European credit sector associations proposed to the European banks as a system of selfregulation, as an alternative to regulations imposed through a Directive.

2.3. An initial check made by the Commission early in 1993 through a sampling study revealed a number of shortcomings.

2.4. Following this check, and after discussions with the PSULG and the PSTDG, the Commission adopted on 14 December 1993 a plan of action based on a further sampling study to measure whether sufficient progress had been made on transfers, against a set of predetermined criteria.

2.5. The results of the checks are contained in a Report () drawn up for the Commission in August 1994 by Retail Banking Research Limited, London. The report is based on research involving 1,048 transfers of ECU 100 from 34 banks in the twelve EU countries.

2.6. Once again the Commission regarded the results as unsatisfactory: as promised in the action plan of 14 December 1993, it has now presented the Communication under review and in particular the Draft Directive regulating transfer practices.

2.7. The Draft Directive also raises a fundamental problem - that of the competition aspect. The Commission had already pointed out in the past () that the banking industry should use agreements to ensure proper functioning of cross-border payments, and had drawn up regulatory principles to that end. These principles have now been revised and are contained in a Draft Communication which will be analyzed in this Opinion.

2.8. The Commission Communication, with a view to the introduction of a single currency, mentions a range of aspects and gives a systematic picture of the problems of EU payment systems. It is a complex picture, in the context of which the Commission sets out its short- to medium-term study and action programmes, which will be commented upon below.

3. Preliminary Comments

3.1. It appears from the present document and the preceding one that the term used for the subject of the Communication - 'cross-border transfers' - gives rise to misunderstandings and to some proposals to change it. It is clear from the context and from the very title of the Communication that the subject is transfers of funds from one country to another within the European Union. This clarification is important for defining the terms and scope of the rules.

3.2. The Italian adjective 'transfrontaliero' (French 'transfrontalier') is no doubt an acceptable neologism, but in current usage it refers to two clearly defined peripheral regions separated by a state border; it cannot therefore apply to the subject in question. The term used in English, 'cross-border', is correct, but translates as 'internazionale' etc., according to the terminology adopted by the Bank of International Settlements ().

3.3. It follows from points 3.1 and 3.2 above that the correct wording to indicate the subject in question exactly can only be 'bonifici nell'interno dell'UE' - in short 'bonifici intracomunitari' - to be translated in French as 'virements intra-communautaires' and in English as 'intra-Community transfers'. It will be seen from the comments on the Draft Directive that this clarification has a practical, and not merely semantic, value.

3.4. The Communication under review has its starting point in the findings of the report which the Commission received in August 1994. The report is more than 120 pages long and is summed up in the Communication in about eight lines of text: too short to properly explain the situation.

3.5. The Commission justified the use of a Directive by the statement that insufficient progress had been made on the subject. The ESC takes note of this, and points out that this view is shared by the European Monetary Institute (EMI) (). While bearing in mind that various banking groups and individual banks have invested large amounts in the development of new, efficient systems, one must recognize that too many banks - especially in certain countries - have remained unresponsive to the Commission's requests and to the guidelines proposed by their European and national organizations.

3.6. In its earlier Opinion, the ESC had come out in favour of self-discipline in the banking sector - a view which the EMI still strongly supports. Bearing in mind also that experience has shown how an overall development of the sector cannot be achieved by that approach, the ESC can only share the Commission's view on the need to resort to a Directive.

4. General Comments on the Draft Directive

4.1. The ESC confirms all statements made in the General Comments section of its Opinion on the previous Communication (); in particular, it wishes to reiterate its appreciation of the Commission's efforts to improve the transparency and quality of implementation of intra-European transfers, by providing a minimum frame of reference and general rules in accordance with the principles of the internal market.

4.2. Consumers' organizations, in particular, support the Directive, regarding it as a response to their wish to receive reliable, full information, including clear indications of the exchange rates, value dates, fees and costs which vary with the different payment methods and execution periods. The provision of such information would help to stimulate competition and promote the Citizen's Europe.

4.3. The ESC hopes that the above conditions can be achieved with the collaboration of the banks; there is however, a risk mentioned on earlier occasions () that full information, applying to the complex collection of existing cases, may be difficult to consult.

4.4. Forecasting of the time necessary for execution and the basis for calculating all the fees and costs chargeable to the client is feasible for the part concerning the bank which receives the order from its own client. For the foreign part, the variety of current methods and conditions will make it necessary to apply reasonable estimates. The enormous number of banks and the variation in charges from one to another make alternative solutions impossible, unless inter-bank agreements at national level are promoted in future.

4.5. As regards time taken for execution of transfers, the results of the study suggest that most of the banks - especially large international banks - will be capable of respecting the Directive. However, it should be pointed out that a number of EU countries do not yet have an efficient national clearing system, so that orders destined for or coming from such countries would be at a disadvantage. The negotiation of different terms could help to correct positions of competitive inferiority, as long as it is combined with suitable levels of charges. The ESC hopes that automated clearing systems will be adopted by the entire EU banking sector, so as to improve procedures generally and reduce costs.

4.6. The ESC notes that in one respect the Draft Directive differs significantly from the plans repeatedly expressed by the Commission and the methods used in its studies and surveys. Whereas it had been repeatedly stated that the rules were intended to assist consumers and SMEs to transfer funds easily in the internal market, the document under review aims to improve crossborder transfer services for citizens and businesses.

4.7. The abandonment of the concepts of 'consumers' and of 'SMEs' in favour of coverage of all payments, whatever their amount, is acceptable as regards the customers' right to transparency (Articles 3 and 4), respect for timescales in the absence of specific agreements (Article 5), and the ban on 'double charging' (Article 6). However, the provision on the so-called 'moneyback guarantee' calls for certain comments:

4.7.1. Large and urgent transfers - a category expressly taken into account by the Central Banks () - are dealt with through entirely different channels from those used for small transfers; they have long been a subject of study and monitoring by the Committee of Governors in the EU countries and now by the EMI, which have drawn up rules (including competition rules) specifically applicable to such transfers. Payments of this type are therefore subject to a different logic from that applying to small transfers and the interested parties - which often include the Central Banks as intermediaries - are different from consumers and SMEs.

4.7.2. The Commission has invited consumers, traders and SMEs to participate in the consultative groups (PSULG) and has rightly become a spokesman for their needs. It has never invited the companies which institutionally deal with high-value transfers to join these groups, nor is there any evidence that such companies have ever encountered difficulties or called for legislative provisions to regulate the matter.

4.7.3. The Commission has based its conclusions on two studies, each carried out on the basis of ECU 100 samples; no evidence has been gathered on high-value payments. It is not therefore acceptable to extend conclusions drawn from such limited cases to a type of transfer which is different as regards techniques, aims and interested parties.

4.7.4. In short, guarantees thought appropriate to limited-value payments cannot be automatically extended to high-value payments; the contractual obligations which would derive from such an extension would involve high risks which, in the absence of consultations, neither the banks nor their clients - nor the Commission itself - have had an opportunity to assess.

4.7.5. The conclusion in the preceding point is also reached by the EMI in its Opinion of 20 March 1995 addressed to the Council, for the same reasons as those given in points 4.6, 4.7.1, 4.7.2 and 4.7.3 above. In that Opinion the EMI also refers to the Treaty on European Union, which entrusts it with the task of promoting international payments, and particularly high-value payments.

4.8. The ESC points out an inconsistency between the declared aim of the Draft Directive - to prepare the way for Economic and Monetary Union - and its scope, which includes credit transfers denominated in third-country currencies; such currencies will not be absorbed by the single currency.

4.9. There is also a legal impediment to the Directive applying to credit transfers denominated in a currency other than those of the EU countries or the ecu: such transfers necessarily involve a bank which is located in a third country and is therefore not subject to Community laws. Nor is it conceivable that such banks could be contractually obliged to respect those laws: the international market has its own rules, and these do not allow for any deviation.

4.10. This legal impediment also has a side-effect: many financial (Swap) operations which take place in the high-value systems involve simultaneous transfers in opposite directions in two or more currencies, at least one of which can be that of a third country. It is inconceivable for one contract to be subject to more than one set of rules - Community and non-Community rules. This consideration precludes the application of the Directive to high-value transfers.

5. Specific Comments on the Draft Directive

5.1. Article 1 - Scope

5.1.1. The Directive cannot cover 'any currency': it must be confined to the currencies of the EU countries, including the ecu (see points 4.8 and 4.9).

5.1.2. In view of the above, the ESC proposes that Article 1(2) of the Draft Directive be amended to read as follows:

'This Directive shall apply to credit transfers which are denominated in the currency of one of the EU countries, including the ecu, and are sent from one EU country to another EU country.'

5.2. Article 2 - Definitions

5.2.1. Article 2(f), 'cross-border payments': the wording here would seem to seek to exclude credit transfers ordered by persons or firms not having an account in a Member State bank, which is obviously not the intention. The sub-paragraph should therefore be amended to read as follows:

'"intra-Community payment" shall mean a payment made by an originator through an institution or its branch in one Member State to be made available to a beneficiary at an institution or its branch in another Member State;'.

5.3. Article 3 - Information prior to credit transfer (made or received)

5.3.1. Transfers vary considerably, including simple cases (from one correspondent to another), and more complex cases where one or more intermediate banks and their subsidiaries are involved. In this last case in particular, the provision of 'precise' information on the periods, fees and charges applied by the foreign banks is objectively impossible. The ESC proposes that the introductory part of the Article be amended to read as follows:

'The institution shall supply its customers with clear written information about the services it provides, and reasonably reliable information on the services offered by corresponding or intermediary institutions, to effect or receive credit transfers.'

5.4. Article 4 - Information subsequent to a credit transfer (made or received)

5.4.1. The reception of a credit transfer, whether from within a country or from abroad, should be subject to the normal procedures and banking practices of each country. In some countries, 'confirmation' is not sent for each transaction but is included in the regular banking statement. The ESC therefore proposes that the introductory part of the Article be worded as follows so as not to impose variations from normal procedure:

'The institution shall supply its customers with clear written information, according to the procedures already in use for domestic transfers, subsequent to their making or receiving...'.

5.5. Article 5 - Obligation to execute in good time

5.5.1. Article 5(1) - the ESC congratulates the Commission on leaving the decision on timescale for execution to the free will of the interested parties, bringing competition into play as a balancing factor. The fixing of a time limit of five days, where there is neither a specific agreement nor a published time-scale, appears to derive from the results of the two Commission studies on ECU 100 credit transfers by 35 European banks, which gave an average time-scale of 4.65 and 4.79 days respectively. These results were achieved by giving instructions to the originating banks to get the credit transfers to the beneficiary by the most rapid means.

5.5.2. The originator may not have a particular interest in the most rapid means, which are normally the most costly; he may in fact choose less rapid means in order to pay less. In such cases, the imposition of a time limit of five days - clearly based on the results of a study of the most rapid means - is not applicable to all cases, which will also include orders by post and the involvement of three or more institutions. It is therefore proposed to amend the first indent of Article 5(1) to read as follows:

'The institution of the originator shall be responsible to the originator for ensuring that the credit transfer is completed no later than the end of the fifth business day following acceptance by it of a payment order from the originator to be executed by urgent means, and provided that the transmission does not involve more than two banks, or that there is an automatic clearing system in the beneficiary's country;'.

5.5.3. The second sub-paragraph of Article 5(1) provides that the institution of the beneficiary shall be obliged to place the amount of the credit transfer at the disposal of the beneficiary at the latest by the end of the business day following completion of the credit transfer. Account must be taken of beneficiaries who do not have an account, and in those cases the obligation to place at the disposal of the beneficiary must be regarded as being met by sending the beneficiary a note that funds have been received. The text of the indent should therefore be amended to take account of this possibility, by adding the following sentence:

'This obligation shall be met by crediting the sum to the beneficiary's account or by sending an advice note if the originator has not indicated an account number.'

5.5.4. Article 5(3) rightly lays down that the beneficiary's institution shall compensate the latter for late payment. The beneficiary's bank should therefore be subject to the same principle of fairness as that applicable to the originator's bank (Article 5(2)): if the delay is due to errors or incomplete instructions on the part of the originator, it is the latter, and not the beneficiary's bank, who should be responsible for paying any compensation. The following sentence should therefore be added at the end of Article 5(3):

'Where the beneficiary's institution can establish that the delay was attributable to the originator, the beneficiary's institution shall have the right to recover from the originator any compensation payable to the beneficiary.'

5.5.5. It should also be pointed out that all legal systems recognize the principle that the obligation to pay compensation is incumbent on the party at fault; the ESC therefore considers that the following new paragraph, Article 5(4), should be inserted:

'An institution which has paid compensation on the basis of Article 5(2) and (3) has the right to be reimbursed by the institution to which the blame for delayed payment is attributable.'

5.6. Article 7 - Obligation of institutions to refund in cases of non-completed credit transfers

5.6.1. The obligations laid down in this Article are obviously inspired by the United Nations' 'standard laws', which has not been adopted by any country - not even the United States, which promoted it in the first place. They conflict with the current legislation on payment orders in all the Member States, which lays down that the originator is not held responsible in cases of force majeure or for the acts of others. More eloquent than any comment are the grounds given by the German Federal Supreme Court on 19 March 1991 for its judgement in a case of erroneous execution of an international payment order:

'having done everything necessary for the execution of the instructions given, the (originator's) bank cannot be held responsible for any error by the other banks involved.'

5.6.2. Moreover, one cannot ignore the rights of the originator, who cannot be expected to make enquiries with the foreign banks; the Directive must therefore lay down the obligation for the originator's bank to look after its client's interests.

5.6.3. In its desire to protect the originator in the event of an order not being carried out, the proposal seems to have forgotten that the beneficiary too must be protected, be he a consumer or a firm. Now, the beneficiary may have an interest - which takes priority over that of the originator - in receiving the credit transfer whatever happens, even if it is late and with the compensation provided for in Article 5(3). The principle of a payment order being irrevocable, which is a basic pillar in all systems, may be saved by a modification complying with criteria of fairness, leaving the beneficiary the option of waiving the right to receive the sum due to him. Account should also be taken of the sensitive legal repercussions of the unilateral revocation of an order in the event of the originator's or beneficiary's bankruptcy.

5.6.4. In all legislations, force majeure (Article 7(3)) is laid down as a legitimate obstacle to execution of the payment order, resulting in exemption of the agent from contractual or legal penalties. It would therefore be wrong if Member States could allow an exemption from contractual obligations for reasons of force majeure, nor is it acceptable for the Community to lay down a principle implying a responsibility of the agent even in cases of force majeure.

5.6.5. As regards the possibility for Member States to derogate from the refund obligation when the payment exceeds ECU 10,000 (Article 7(3)), the ESC, on the basis of points 4.7.1 to 4.7.5 and 4.10 above, thinks that a limit should be laid down which is consistent with the principle of maintaining a clear separation between high-value and limited-value systems. The limit of ECU 10,000 given by the Commission seems adequate and would have the advantage of covering the bulk of the credit transfers within the EU.

5.6.6. In accordance with the above points, the ESC proposes that Article 7(1) and (2) be amended to read as follows:

'1. If, after a payment order of a value not exceeding ECU 10,000 has been accepted by the originator's institution, the related credit transfer is not completed for reasons other than force majeure or the fault of the originator, the originator is entitled - unless the beneficiary objects - to have his account credited on demand with the full amount ... such demand to be made to his own institution ... instructed it.'

'2. If the non-completion of the credit transfer was caused by force majeure or by defective instructions given by the originator to the institution, the originator's institution and the other institutions involved shall use their best endeavours to make the refund to the originator, without the addition of interest and charges, as described in paragraph 1. The beneficiary's option of objecting, as provided for in paragraph 1, remains unaffected.'

5.6.7. Article 7(3) should be deleted.

5.7. Article 9 - Report to the European Parliament and the Council

5.7.1. The ESC calls for the Article to be amended as follows:

'No later than 31 December 1999, the Commission shall present a report to the European Parliament, the Council and the Economic and Social Committee...'.

6. Comments on the draft notice on the application of the EC competition rules to crossborder transfer systems

6.1. Scope (Point 1)

6.1.1. The Commission had previously drawn up a document () which laid down principles, or rather guidelines, based on the application of competition rules to intra-European transfer systems. Intervening experience, the development of the systems and discussions with the industry have led the Commission to draw up a new draft notice.

6.1.2. The subject dealt with is, as the Commission points out, 'limited to systems insofar as they carry cross-border transfers', and these are therefore dealt with separately from other systems, whether contact or distance systems. The ESC also draws the Commission's attention to the fact that payment systems, whatever their nature, form part of a whole which involves the banking system as a supplier, clients - consumers, SMEs, trade and industry - as beneficiaries of the service, the Central Banks as supervisors of the stability of the system and the EMI as regulator for monetary circulation aspects when necessary. When regulating intra-European transfer systems, it is therefore necessary to take account of the existing inter-relationship between the various systems and to have an overall perspective; in other words, when establishing a rule for one system it is necessary to ask oneself what effect it will have if it is to be applied by analogy to other systems.

6.1.3. In the earlier document on the principles of competition the Commission recognized that, when setting up or linking transfer systems, institutions may need to base themselves on firmly established principles for the technical, legal and operational aspects of the services provided to clients. Firmly established principles must be clear, with minimum scope for interpretation by the parties; yet the ESC notes that in various parts of the document terms and concepts are used which are too vague and likely to give rise to doubts, not certainty.

6.1.4. The recommendation in the preceding point is based on the various cases of Commission intervention in respect of the application of competition rules to payment systems in general, some of which are still under discussion. The lack of precise benchmarks gives rise to uncertainties in the banking sector, which can be reflected in delays or failure to adopt initiatives, to the detriment of the innovation programme recommended by the Commission itself.

6.2. Non-price competition (Point 2)

6.2.1. Paragraph 4

The ESC agrees that the principles of competition law and freedom to provide services must apply also to systems set up by legislation or guided by public authorities (), and agrees with the Commission on the approach adopted - that of not dealing in the document with aspects of public regulation applying to such systems.

6.2.2. The systems to which the Commission refers are obviously those of transfers of large sums, in which the central banks normally act as managers, and in any case as institutionally responsible for the stability of the systems and for monitoring risks, in particular systemic risks. The regulatory guidelines of the systems have been drawn up () by the Working Group on EC Payment Systems set up by the Committee of Governors of Central Banks of the EU countries, and adopted by the EMI Council in January 1995. This document sets out regulatory criteria for competition and for access and operational rules.

6.2.3. Although the Commission decision not to deal in its competition document with the aspects concerning these systems is fully justified, it is not clear why they are included in the Directive. Comments on this question are made elsewhere in this Opinion.

6.2.4. Paragraph 5

The provisions seem to concern only the banks. The provisions should, however, also cover any 'other institution' offering payment services to the public, as laid down in Articles 1 and 2(b) of the Draft Directive. If the 'other institutions' are covered by the Directive, they must also be covered by the rules on competition.

6.2.5. Paragraph 6

The ESC agrees with the principle of open systems; however, it points out that the criteria for deciding whether a system constitutes an 'essential facility' are too vague. The absence of objective criteria allows ample scope for subjective interpretation by the banks and the Commission, with the disadvantages mentioned in point 6.1.3 above. The ESC thinks it necessary for the Commission to redraft this paragraph, setting out objective criteria; it is unacceptable in its present form.

6.2.6. Paragraph 8

In determining the quota for a candidate's access to a system, the Commission refers to a share not exceeding a fair share of the 'actual cost' of past investments. As such a participation is subject to normal market rules, the term 'actual cost' has no meaning; the exact concept is that of the 'current value' of the investments.

6.2.6.1. The ESC understands and approves the Commission's effort to establish conditions for the access of foreign banks to a national system, while respecting the principles of freedom of establishment and freedom to provide services. However, application of the criterion that a branch of a foreign bank can influence the decision on access by citing the experience and volume of payment transactions of its parent bank in the country of origin is likely to give rise to cases of reverse discrimination against banks of the host country, which on a basis of parity of objective conditions would be denied access to the system. As worded, the principle is unacceptable; again in this case, further clarification is required of the criteria on the basis of which the 'worth' of the parent bank's experience and volume of transactions is to be assessed.

6.2.7. Paragraph 10

The ESC agrees with the principle that a system that is not an 'essential facility' may prevent individual members from joining other systems; however, it wonders whether this provision more or less automatically includes the ACHs (). Systems based on ACHs have been mentioned repeatedly by the Commission as the best for facilitating intra-European payments; they can be fairly small at the outset, so that they are not classified as an 'essential facility'. Banks would look on a risk of not being able to join alternative systems as a disincentive to joining an ACH, thus damaging at the outset the system which the Commission wishes to encourage. It would be desirable to specify that membership of an ACH is never incompatible with membership of alternative systems.

6.2.8. Paragraph 12.1

The English and German versions of this Article lay down that operational standards can cover aspects other than those listed in 12.1; the French and Italian versions, on the other hand, imply that the list is exhaustive. The 'broad' version is probably what the Commission intended; in that case, it would be necessary to replace 'dont' by 'notamment' in French and the words 'comprendenti' by 'fra l'altro' in Italian. The other language versions should be checked.

6.3. Price competition (Point 3)

6.3.1. Paragraph 13

The ESC supports the Commission's contention that no agreement between participating banks on prices of transactions with their customers can be accepted.

6.3.2. Paragraph 14

The general principle expressed in the first part of the paragraph must be supplemented with an indication that 'participating banks' include intermediary banks. The footnote on the ACH should point that not all ACHs are national; in Germany, for example, there are regional ACHs.

6.3.2.1. The Commission approaches the question of interchange fees in terms of cost sharing. It is clear that any service must involve a reasonable coverage of costs; this should be included in the Communication.

6.3.3. Paragraph 15

Interchange fees represent a necessary technical feature of any funds transfer system, and they must necessarily be predetermined by an agreement. The question has been debated over a long period, and this would be an appropriate time to arrive at a definitive solution. The Commission could grant a general exemption for the interchange agreements, if necessary by reference to a study by independent experts showing the technical necessity for interchange fees. It would of course reserve the right to examine and to approve or reject the extent of the fees covered by the agreement, according to the criteria of fair distribution of benefits expressed in the final part of the paragraph.

6.3.3.1. It should also be pointed out that the interchange fee is not determined by competition: as a rule, for international transfers the choice of the bank to carry out the transaction is made by the originator, not his bank.

6.3.4. Paragraph 16

The ESC fully approves the Commission's commitment to eliminating the unacceptable practice of 'double charging', and agrees with the proposed text. However, it points out that the beneficiary's bank may incur costs which have nothing to do with the international nature of the payment, for example where it is necessary to search for a beneficiary who does not have account links, or in cases where the address is wrong or has changed. The admissibility of costs not related to the international nature of the transaction should be covered by the paragraph.

6.3.5. Paragraph 19

In the last part of this paragraph, the Commission seems to take the view that the existing national systems, or the ACHs, operate free of charge without interchange fees. Such fees are, however, always necessary to distribute the costs fairly among the participants, and are therefore a technical feature of a multilateral system. The ESC therefore proposes the deletion of the final phrase 'and multilateral interchange fees would not seem necessary'.

6.3.6. Paragraphs 22, 23 and 24

In the ESC's view the wording of these Articles raises a serious problem. The Commission would appear to recognize the validity of agreements to cover the 'necessary' extra costs borne by beneficiaries' banks, and on this point the ESC can only agree. The problem arises with the term 'actual' extra costs: there is no absolutely reliable system for determining the costs of banking services, and they can vary enormously depending on the size of the bank, the nature and frequency of the services rendered and a number of other factors which cannot be objectively determined. Adoption of the concept of 'actual costs' would introduce an element of uncertainty which could give rise to endless discussions and disputes. The ESC proposes replacing the expression 'actual costs' by 'costs'; the Commission would of course retain the right to assess the suitability of such costs overall (with a favourable margin) when the agreements are being approved.

6.3.7. Paragraph 24.2

On the option of negotiating fees lower than the maximum amount, the ESC refers to point 6.3.3.1: given the lack of reasons for competition in this field, use of the option would be entirely theoretical.

7. Comments on Section III of the Commission Communication - Progress on accompanying measures aimed at improving cross-border payments

7.1. The role of payment systems in preparing for the transition to the ecu (Point III.1). The ESC welcomes the Commission's decision to continue studies on the practical problems connected with the introduction of a single currency, with the assistance of the two consultative groups on payment systems. It recommends that the Commission include the EMI among its regular discussion partners, through its appropriate working groups.

7.2. Simplification of reporting requirements for balance-of-payments statistics (Point III.2). The ESC hopes that the work of the Task Force is rapidly completed and that it results in the determination of a uniform level for the minimum reporting threshold.

7.3. 'Legal framework' for cross-border payments (Point III.3). The ESC points out that by presenting the Draft Directive (Articles 5, 6 and 7), the Commission has anticipated the deadline for adoption of the legal standards still being discussed. Apart from this, it would draw the Commission's attention to the delicate problem of the finality of the payments and the effect it would have on the laws governing bankruptcy, which are not uniform throughout the Member States.

7.4. Linkages between automated clearing houses (ACHs) (Point III.4). The ESC approves and supports the Commission's efforts to introduce automated clearing houses in all the Member States and create links among them. These efforts must not, however, lead to single solutions excluding alternative systems, and above all must not be such as to increase the costs borne by user firms and consumers.

7.5. Transparency of payments made by means of a payment card (Point III.5). The ESC approves the action taken by the Commission in this sector, and recommends that the consultative groups on payment systems consulted by the Commission be supplemented by the consultation of all interested parties, in particular the international payment card organizations.

7.6. Pre-paid cards (electronic purses) (Point III.6). The ESC recommends that the problem of pre-paid cards be examined with all necessary caution since these are entirely new instruments, the development of which is being monitored by the EMI; indeed, the central banks regard this instrument as falling within their institutional responsibilities for the regulation of monetary circulation. The Community cannot adopt rules until pre-paid cards have been introduced, i.e. until users have had some experience of them and had a chance to express their needs.

Done at Brussels, 1 June 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() ESC Opinion of 6 July 1994 on the Communication and Draft Proposal for a Directive on the Transparency and performance of cross-border payments (OJ No C 388, 31. 12. 1994 and SEC(93) 1968 final).

() Commission Recommendation of 14 February 1990 on the transparency of banking conditions relating to crossborder financial transactions (90/109/EEC, OJ No L 67, 15. 3. 1990).

() 'Study in the Area of Payment Systems into the Transparency of Conditions for Remote Cross-Border Payment Services and the Performance of Cross-Border Transfers' (English version only).

() Cf. Annex C to the Commission Working Document 'Easier cross-border payments: breaking down the barriers' (SEC(92)621 final, 27. 3. 1992).

() Cf. inter alia, 'Central Bank Payment and Settlement Services with respect to Cross-Border and Multi-Currency Transactions', Bank of International Settlements, Basle, 1993.

() Opinion of the EMI addressed to the Council, 20. 3. 1995, point 3.

() OJ No C 388, 31 12. 1994.

() See the Opinion mentioned in footnote 1, points 2.2.2 and 2.2.3 and the Opinion on the discussion document 'Making payments in the Internal Market' (OJ No C 120, 6. 5. 1991).

() Cf. 'Minimum Common Features for Domestic Payment Systems', Report to the Governors of the Central Banks of the EC countries, Working Group on Payment Systems, Basle, November 1993, Chapter I, point 1.3.

() 'Principles on competition for credit transfer systems', Annex C of the Commission Working Document of 27. 3. 1992.

() The comments on this point are based on the French version of the text; the English version seems to lend itself to ambiguous interpretation and the Italian version seems to imply that the principles apply only to systems set up by legislation or guided by public authorities.

() 'Minimum Common Features for Domestic Payment Systems', November 1993.

() ACH stands for 'Automated Clearing House', an institution for the clearing of national or international payments.