EUROPEAN COMMISSION Brussels, 23.11.2017 COM(2017) 683 final REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation EU n°260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009



Report to the European Parliament and to the Council on the application of Regulation EU n°260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009 1.Introduction and summary Regulation EU n°260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009, also known as the Single Euro Payments Area (SEPA) Regulation or SEPA end-date Regulation was adopted in 2012 and has been a major step forward in the proper functioning of the internal market through the creation of an integrated market for electronic payments in euro that makes no distinction between national and cross-border payments. The Regulation imposed 1 February 2014 as an end-date for migration in the euro area. A month before the initial end-date for migration, the end-date was postponed by 6 months until 1 August 2014 to take into account delays in the migration observed in various Member States. This 6-month delay was sufficient to ensure a smooth transition from legacy credit transfers and direct debits in euro to SEPA credit transfers (SCT) and direct debits (SDD). Member States that do not belong to the euro area had until 31 October 2016 to migrate to SCT and SDD. In its article 15, the SEPA Regulation mandates the Commission to present a report on the application of the Regulation: "By 1 February 2017, the Commission shall present to the European Parliament, the Council, the European Economic and Social Committee, ECB and EBA a report on the application of this Regulation accompanied, if appropriate, by a proposal." On 15 December, the European Commission sent a questionnaire to Member States for reply by 31 January 2017 about a series of issues related to the application of the Regulation such as the migration from legacy credit transfers and direct debits to SCT and SDD for each and every Member State, the use of options by Member States, the authorities designated for ensuring compliance with the Regulation and their powers, or the issues that may still be encountered across the EU with regards to the implementation of the Regulation. Member States' responses formed the basis for this implementation report. The report has also been submitted to and discussed at the EU Forum of national SEPA coordination committees of 21 April 2017, a European Commission expert group in charge of monitoring the implementation of SEPA across the EU. This report concludes that, overall, the SEPA Regulation is correctly applied across the EU. There is currently no need for a follow-up legislative proposal. The very few and well identified issues (IBAN discrimination and competent authorities competences) that persist have been addressed by Member States and their resolution should be closely monitored. The main issue to be closely observed is the IBAN discrimination by payees (i.e. imposing on payers to pay from an account located in a specific country, which is contrary to article 9 of the Regulation) as the number of cases have decreased but new cases could still appear. The SEPA project did not end with the completed migration to the SEPA SCT and SDD standards. It is very much alive through initiatives that participate in building the Single Euro Payments Area such as 'SCT inst' - a European project for instant payments in euro that will be launched in November 2017 - or the Mobile Proxy Forum - an initiative aiming at interoperating peer-to-peer mobile payments solutions across the EU, projects supported by the Euro Retail Payments Board, chaired by the European Central Bank and where the European Commission sits as an observer. 2.Member States’ reporting 2.1.Migration to SEPA Credit Transfers and SEPA Direct Debits The figures below were communicated by Member States and reflect the state of play as of December 2016 regarding the use of SEPA instruments instead of legacy credit transfers and direct debits that were in use before. The figures show that, across the EU, nearly all credit transfers and direct debits in euro are now processed in compliance with the SCT and SDD standards (Tables 1 and 2). Some further efforts are to be done to reach full compliance in few non-euro area Member States for which the deadline for migration was 31 October 2016. With respect to SDD, some Member States decided to discontinue legacy direct debits and opt for solutions combining SEPA Credit Transfers and e-invoicing. In those cases, SEPA Direct Debits can still be offered by payment services providers within the country but will rather find a use in cross-border transactions and not national transactions anymore, mainly to serve companies that would need them in their cross-border activities. These countries are all marked "not applicable - N/A" in table 2, 5 and 6 even though there may be a very limited use of SDDs.





Table 1: SCT migration rates communicated by Member States as of end 2016 Euro area SCT migration rate Non Euro area SCT migration rate Austria 100% Bulgaria 64% Belgium 100% Croatia 100% Cyprus 100% Czech Republic 100% Estonia 100% Denmark 100% Finland 100% Hungary 100% France 100% Poland 100% Germany 100% Romania Partially compliant Greece 100% Sweden 100% Ireland 100% United Kingdom 100% Italy 100% Latvia 100% Lithuania 100% Luxembourg 100% Malta 100% The Netherlands 100% Portugal 100% Slovakia 100% Slovenia 100% Spain 100%



Table 2: SDD migration rates communicated by Member States as of end 2016 Euro area SDD migration rate Non Euro area SDD migration rate Austria 100% Bulgaria N/A Belgium 100% Croatia N/A Cyprus 100% Czech Republic 100% Estonia N/A Denmark 100% Finland 100% Hungary 100% France 100% Poland 100% Germany 100% Romania 100% Greece 100% Sweden N/A Ireland 100% United Kingdom 100% Italy 100% Latvia N/A7 Lithuania N/A7 Luxembourg 100% Malta 100% The Netherlands 100% Portugal 100% Slovakia 100% Slovenia 100% Spain 100% A historical perspective, provided in tables 3, 4, 5 and 6, shows that depending on the Member States concerned, the migration flow either followed a big bang approach (e.g. Estonia) or a progressive migration to SEPA instruments (e.g. Germany). The same tables also indicate that the 6 month delay proved a necessary step as migration rates communicated for January 2014, though already quite high for SEPA Credit Transfers, were not sufficient to ensure full processing of payments in the case of SEPA Direct Debits. Unexpected issues could have arisen on 1 February 2014, when the SEPA end-date Regulation was supposed to become applicable, with the potential risk of payments not being processed after that date.



Table 3: Evolution of SCT migration rates from 2008 to today for euro area Member States Euro area 2nd half 2008 2nd half 2011 Jan.2014 Feb.2014 Aug.2014 Dec.2016 Austria 1.44% 11.89% 66.2% 74.95% 90% 100% Belgium 2.76% 44.79% 86.79% 95.64% 100% 100% Cyprus 29.85% 60.06% 100% 100% 100% 100% Estonia 0.95% 2.65% 99.7% 100% 100% Finland 1.35% 67.57% 100% 100% 100% 100% France 0.58% 24.72% 84,0% 91.7% 100% 100% Germany 0.29% 5.56% 58.51% 77.85% 100% 100% Greece 0.54% 1.71% 81.53% 83.12% 99.38% 100% Ireland 0.19% 2.34% 60.89% 90.61% 100% 100% Italy 0.73% 10.62% 61.49% 89.86% 100% 100% Latvia 100% 100% 100% 100% Lithuania 100% Luxembourg 85.76% 90.27% 96.3% 96.3% 97.81% 100% Malta 3.28% 9.71% 68.72% 80.16% 100% 100% The Netherlands 0.15% 0.88% 86.38% 91.75% 99.08% 100% Portugal 0.68% 1.48% 89.16% 92.32% 98.91% 100% Slovakia 0% 1.03% 100% 100% 100% 100% Slovenia 0.1% 55.74% 99.3% 99.36% 100% 100% Spain 1.51% 31.77% 82.71% 90.5% 100% 100% The figures for February 2014 and August 2014 are highlighted as they show the differences in migration rates between the original end-date and the actual end-date that, in January 2014, was postponed by six months from February to August 2014. For Member States that do not belong to the euro area, the SEPA Regulation required a migration by 31 October 2016 as indicated in its article 16§8: "Payment Services Providers located in, and Payment Services Users making use of a payment service in a Member State which does not have the euro as its currency shall comply with the requirements of Articles 4 and 5 by 31 October 2016. Operators of retail payment systems for a Member State which does not have the euro as its currency shall comply with the requirements of Article 4(2) by 31 October 2016." Table 4: Evolution of SCT migration rates in 2015 and 2016 for non-euro area Member States Non Euro area H2 2015 Q1 2016 Q2 2016 Dec 2016 Bulgaria 59.21% 60.7% 61.9% 100% Croatia 100% Czech Republic 87.18% 89.5% 90.02% 100% Denmark 100% 100% 100% 100% Hungary 84.35% 84.16% 100% Poland 100% Romania 44.66% 46.01% 45.38% Partially compliant Sweden 95% 95% 99% United Kingdom 100% 100% 100% 100% Table 5: Evolution of SDD migration rates from 2013 to today for euro area Member States Euro area Q1 2013 Q4 2013 Jan.2014 Feb.2014 Aug.2014 Dec.2016 Austria 11.15% 34.65% 73.95% 87.89% 99% 100% Belgium 19.17% 38.54% 64.09% 89.89% 100% 100% Cyprus 0% 0% 0% 0% 100% 100% Estonia N/A N/A Finland N/A N/A France 0.78% 17.94% 72.51% 87.02% 100% 100% Germany 0.14% 10.51% 29.4% 53.4% 100% 100% Greece 50.13% 67.84% 70.1% 69.53% 99.64% 100% Ireland 0.42% 22.09% 61.35% 89.65% 100% 100% Italy 0.01% 2.83% 34.3% 53.28% 100% 100% Latvia 0% 0% 0% N/A Lithuania N/A Luxembourg 0.06% 15.92% 49.09% 74.37% 98.05% 100% Malta 0% 0% 23.35% 47.79% 100% 100% The Netherlands 0.01% 32.62% 73.62% 84.38% 99.81% 100% Portugal 0.1% 7.55% 26.68% 53.14% 99.88% 100% Slovakia 0% 0% 0.01% 100% 100% 100% Slovenia 86.81% 99.33% 100% 100% 100% 100% Spain 0.02% 1.8% 15.34% 48.82% 100% 100% Table 6: Evolution of SDD migration rates in 2015 and 2016 for non-euro area Member States Non Euro area H2 2015 Q1 2016 Q2 2016 Dec 2016 Bulgaria N/A Croatia N/A Czech Republic 100% Denmark 100% Hungary 100% Poland 100% 100% 100% 100% Romania 0.04% 0% 0.02% 100% Sweden N/A United Kingdom 100% 100% 100% 100% 2.2.Options used by Member States

In order to allow for a smooth transition to SCT and SDD, the SEPA Regulation allowed for various options to be activated by Member States of the euro area until February 2016. These options were the following: ·Option 1: conversion facilities for consumers. Typically, consumers' payment services providers would accept a national account number (BBAN) to initiate a transaction and convert that number into an international account number (IBAN). ·Option 2: continuation of niche products. Domestic legacy credit transfer or direct debit transactions with a cumulative market share, based on the official payment statistics published annually by the ECB, of less than 10 % of the total number of credit transfers or direct debit transactions respectively, could be continued until 1 February 2016 (e.g. TIP in France, RID Finanziario in Italy, Direct Debit with no refund in the Netherlands). ·Option 3: one-off direct debits. These services allowing consumers to make payment transactions that would be generated using a payment card at the point of sale which would result in a direct debit to and from a payment account identified by a BBAN or an IBAN could be continued until 1 February 2016 (e.g Elektronisches Lastschriftverfahren – ELV – payments in Austria and Germany), unless made compliant with the SEPA requirements. ·Option 4: a delayed usage of standard message format ISO 20022 XML for payment services users (PSUs) which initiate or receive individual credit transfers or direct debits that are bundled together for transmission. ·Option 5: a delayed BIC elimination for national payment transactions, as today payers do not have to provide BIC for payments to be executed within the EU, the IBAN only is sufficient. Most Member States made use of at least one of these options as indicated in Table 7 which shows, where relevant, the use as well as the later deactivation of those options by Member States. These options were only relevant for Member States of the euro area given that they were valid until 1 February 2016 for Member States that had migrated before. They were not applicable for Member States from outside the euro area which had a target date for migration set on 31 October 2016. Table 7: Use of options by Member States and current status of these options. Euro area Option 1 Option 2 Option 3 Option 4 Option 5 Status in May 2017 Austria √ √ All deactivated Belgium None activated Cyprus √ √ √ All deactivated Estonia √ Partially deactivated Finland None activated France √ Deactivated Germany √ √ √ All deactivated Greece √ √ √ All deactivated Ireland √ Deactivated Italy √ √ All deactivated Latvia √ Deactivated Lithuania None activated Luxembourg None activated Malta √ Deactivated The Netherlands √ √ All deactivated Portugal √ √ √ All deactivated Slovakia √ √ All deactivated Slovenia None activated Spain √ √ √ All deactivated 2.3.IBAN discrimination Consumers across the EU have reported and complained about firms and payments (e.g., tax payments, cross-border utility payments) that can only be done from or to a national payment account in euro. Such restrictions are not allowed under article 3 (reachability) and article 9 (payment accessibility) of the SEPA Regulation and constitute a real barrier to the smooth functioning of SEPA. This issue was and remains the number one priority for the European Commission in relation with the application of the SEPA Regulation as it undermines one of the most tangible benefits that consumers and companies can experience from the SEPA Regulation: the freedom to pay from anywhere within the EU, the freedom to use one and only one bank account (in euro) for each and every transaction within the EU allowing them also to reduce the costs linked to the maintenance of two or more payment accounts. The European Commission raised the issue in various fora to ensure awareness among market participants of the payment industry but also Member States: the Payment Systems Market Expert Group, the EU Forum on National SEPA Committees and the Euro Retail Payments Board.