WRITTEN QUESTION E-3962/98

by Jessica Larive (ELDR) to the Commission

(4 January 1999)

Subject: Cost of electronic transactions in the EU

Since 2 December one of the Dutch banks has been charging Fl 5 for withdrawals of money from cash dispensers in other EU Member States. The same bank also charges a fee for electronic transactions in shops in other countries. Other banks will probably follow suit next month. (Cf. NRC of 2 December 1998, Algemeen Dagblad and Telegraaf of 3 December 1998).

1. Is the Commission aware of this situation in the Netherlands?

2. Can the Commission state whether it believes this runs counter to efforts to achieve greater mobility for European citizens?

3. Does the Commission agree that this situation violates the principle of the free movement of goods, services, capital and persons within the European Union?

4. Does the Commission agree that the consumer should benefit from the introduction of the euro, rather than simply having to pay more?

Answer given by Mr Monti on behalf of the Commission

(17 February 1999)

The Commission is aware that banks in the Netherlands (and elsewhere) have altered their method of charging for electronic transactions and cash withdrawals carried out abroad.

The facility for a bank customer in one Member State to withdraw money from cash dispensers, or to carry out other electronic transactions, in another Member State is a service for which banks are at liberty to charge. Prior to the introduction of the euro such charges were hidden in the (variable) exchange rate which was applied. For cross-border transactions, banks charged customers the difference, or "spread", between their buying rate and their selling rate for a currency. This was a non-transparent method of charging, which the Commission had long called on banks to discontinue. With the introduction of the euro, banks are no longer able to calculate their cross-border charges within an exchange rate "spread", for transactions involving the currency units of participating Member States. This is because of the fundamental requirement that the fixed conversion rates are applied for all conversions and exchanges between participating national currency units. Banks must, therefore, alter their method of charging.

The Commission's initial evaluation(1) of the intention of banks to implement its Recommendation 98/286/EC of 23 April 1998 on dialogue, monitoring and information to facilitate the transition to the euro(2) indicated that banks throughout the euro area intend to implement the Recommendation. This means that there will be no charging for converting accounts to euro or for converting payments to and from the euro and the national currency unit of a participating Member State. This is an important and significant contribution to public confidence in the changeover to the euro. Of course, the Recommendation does not ask that banks cease to charge for their services, including the facility to make cash withdrawals abroad, but it does provide for the transparency of such charges. In addition, Recital 7 and Article 4 of the Recommendation also recommended that, where possible, banks should, in advance of 1 January 1999, alter their method of showing charges for cross-border transactions and currency exchanges in order to avoid misunderstandings about levels of charges after this date.

The Honourable Member's report of a Dutch bank charging a fixed amount for such transactions with effect from 2 December 1998, indicates that this bank altered its method of charging for these transactions in advance of 1 January 1999. Banks in other participating Member States similarly altered their methods of charging for cross-border transactions on or before 1 January 1999. The Commission does not believe that the new method used by banks for charging for the exchange of banknotes runs counter to its efforts to enhance the mobility of citizens. The Commission shares the Honourable Member's belief in the importance of the principles of free movement of people, goods, services and capital. The freedom of financial institutions to charge for the services they provide is, however, not in contrast with these freedoms.

The Commission fully agrees that the consumer should benefit from the introduction of the euro. The Honourable Member seems to suggest that, rather than benefiting, consumers "have to pay more". As a matter of fact, charges are expected to decrease and this trend should continue due to increased competition.

Nevertheless, the Commission is examining the level of charges applied by banks for cross-border transactions and exchanging banknotes of participating Member States. It recently raised this matter with the presidents of the main European banking federations asking them for information concerning these charges in the Member States, including a comparison between 1998 and 1999 figures on charges. The Commission will also receive information from consumer associations and individual citizens in the Member States and will act on any misunderstandings, misleading information or abuses.

The Commission considers that there are strong reasons to believe that substantial differences in the level of charges for cross-border transactions compared to domestic transactions will gradually disappear in a single currency area. Substantial differences will be eliminated if competition is allowed to operate freely. This, however, requires the effective tackling of weaknesses in cross-border payments infrastructure and the removal of other structural obstacles to cross-border competition. The Commission intends to be a catalyst for such changes and plans to issue a communication in the spring of 1999 covering the policy relating to payment systems in economic and monetary union (EMU). This will set out a detailed framework to achieve the goal of a single payments area.

(1) Available on the Internet at http://europa.eu.int/comm/dg15.

(2) OJ L 130, 1.5.1998.