WRITTEN QUESTION E-2211/99

by Gérard Caudron (PSE) to the Commission

(29 November 1999)

Subject: Bank charges on cross-border payments

I wish to reiterate to the Commission my concern and my exasperation at the attitude of some banks which continue to apply scandalously high bank charges on cross-border payments in euros with an intolerable lack of transparency.

The Commission has already been asked about the measures it proposes to take (question E-3825/98(1)).

It replied that banks throughout the euro area intend mldr to implement. Recommendation (98/286/EC)(2) on this matter. What is the position now? It is not clear that the banks have altered their attitude in the slightest. It seems likely that the Commission shares these doubts, since it has carried out a number of investigations into banks in the Netherlands, Ireland and Belgium. It is to be hoped that MEPs and European citizens will be kept informed of the results of these inquiries.

It is clear that there is a lack of will in the banking sector, and also among the Member States. Directive 97/5/EC(3) on cross-border transfers, which provides that costs should be transparent, should have been transposed into national law by 14 August 1999. However, if one wishes to consult the national transposition measures, the reply from all the Member States is the same: no reference available! And yet the Member States had two years to transpose the directive into their legal systems. The deadline has passed, and they are therefore liable to proceedings for failing to carry out their Treaty obligations.

What measures does the Commission propose to take?

I gather that the Commission is proposing to publish a communication on the payment system within the EMU. What stage has this reached?

(1) OJ C 348, 3.12.1999, p. 3.

(2) OJ L 130, 1.5.1998, p. 22.

(3) OJ L 43, 14.2.1997, p. 25.

Answer given by Mr Bolkestein on behalf of the Commission

(17 January 2000)

The Commission is conscious of the problems that remain in connection with cross-border payments, be it in euro or in national currency units.

Recommendation 98/286/CE of 23 April 1998 concerns banking charges for conversion to the euro and lays down a standard of good practice which concerns mainly the conversion of scriptural money from national currencies to the euro and vice-versa. In this regard, Article 2 of this Recommendation provides that the conversion of incoming and outgoing payments and of accounts from the national currency to the euro should be free of charge. On this latter point, the Commission has no information that the Recommendation has not been followed.

On the exchange of banknotes and coins of the euro zone, the Recommendation provides for an obligation of full transparency. During the transitional period, banks should apply the official conversion rates and indicate separately all charges applied to such operations. Banks shall perform exchange operations free of charge only from 1 January 2002 and subject to certain conditions (i.e. only for their customers, for household amounts and for conversions from the national currency to the euro).

Therefore, from the beginning of the transitional period, Community banks are providing specific information on charges for exchange operations. This new practice has revealed a surprisingly high level of charges, which has understandably provoked strong reactions among the European public. In reality, such charges were already applied before the transitional period, but were not visible, since they were

included in the exchange rate applied to these operations (the so-called spread, i.e. the difference between the buying and selling rate of a currency applied by the bank). It is clear that, due to this practice, some people believed that the costs of currency exchange or crossborder transactions were lower than they actually are.

Moreover, the exchange risk, which now no longer exists between currencies of the euro zone, was never a main element of the charges related to exchange transactions. According to the information available, the exchange risk accounted for approximately 20 % of the overall charges. A recent test carried out by consumer organisations in five Member States(1) has in fact shown that prices for banknote exchange have decreased by approximately 25 %; therefore banks seem to have passed to their customers the benefit of the removal of the exchange risk.

In February 1999, a cartel investigation was begun to look for any evidence that banks, banking federations and associations may have acted in collusion to fix charges for all forms of euro-zone currency exchange transactions during the transitional period (1 January 1999 to 31 December 2001). The investigation focuses in particular on price-fixing for euro-zone notes and coin currency transactions, and cross-border transfer payments. On 16 and 17 February 1999, the Commission carried out simultaneous inspections at eight banks in four countries. Further inspections were carried out on 20 October 1999 at eight different locations in Belgium, Ireland and the Netherlands. Also on 20 October 1999, some 250 banks in the euro-zone received letters requiring them to provide data on bank charges for foreign exchange transactions prior to, and after the introduction of the euro. During the economic and monetary affairs committee hearing of 19 October 1999, the Commissioner responsible for competition said that he had instructed his services to accelerate the cartel investigation. The Commission is actively pursuing the investigation and cannot, at this stage, make further comments.

On the separate but related issue of cross-border credit transfers the Commission continuously underlines the need to remove the differential between charges for cross-border and domestic transactions. The weaknesses in the infrastructure of cross-border payment systems are evident and require financial institutions to make the necessary investments. On the other hand, public authorities at national and Community level have to tackle the structural as well as administrative obstacles which unnecessarily burden the banks in processing these transactions.

The Commission has the impression that the situation has improved since the entry into force of Directive 97/5/EC of the Parliament and of the Council of 27 January 1997 on cross-border credit transfers(2). This is supported by the fact that the number of complaints addressed to the hotline installed at directorates general Internal market and financial sources and Health and consumer protection decreased rapidly since the expiry of the transposition period of the Directive.

The Directive has been implemented by 11 Member States(3). Belgium, Greece, Italy and Portugal have not yet transposed the Directive into national legislation; infringement procedures have started in these four cases.

At the beginning of 2000, the Commission intends to issue a communication on the future of payment systems in the single market, which will be the basis for a comprehensive and balanced policy in order to achieve the goal of a single payments area. The communication will examine the existing barriers in cross-border payments and propose concrete measures in order to reduce them. In particular, the Commission will urge Community banks to establish more efficient links between national retail payment systems as soon as possible.

(1) Survey of BEUC/Test Achats carried out in Belgium, Spain, France, Italy, and Portugal.

(2) OJ L 43, 14.2.1997.

(3) National laws implementing Directive 97/5/EC: Belgium: , Denmark: Law No 237 of 21.4.99; Germany: Überweisungsgesetz, BGBl. part I, page 1642; Spain: Law 9/1999, OJ No 88 of 13.4.1999, page 13653; France: Art. 78 of Law No 99-5322 of 25 June 1999 concerning savings and financial security (JORF, 29 June 1999, page 9507) and Règlement No 99-09 of 9 July 1999 of the banking and financial regulation committee (JORF, 27 July 1999, pages 11160 and 11161, Corrigendum JORF of 21 August 1999, pages 12559 and 12560). Greece: -; Italy: , Ireland: Statutory Instrument No 231 of 1999, European Communities (Cross Border Credit Transfers) Regulation; Luxembourg: Law (No 4478) of 29.04.99 (OJ of 12.05.99); the Netherlands: Law of 12.11.1998 (OJ 686/1998); Austria: Bundesgesetz 123 (Überweisungsgesetz, BGBl of 22.7.1999, Part I, page 159), Portugal: , Sweden: Law SFS 1999:268 of 12.05.99, (OJ of 01.06.99), Finland: Law 821/1999 (OJ of 4.8.1999); United Kingdom: Statutory Instrument Cross Border Credit Transfers Regulation 1999 (1999 No 876) of 30 June 1999, before Parliament on 1 July 1999.