Opinion of the European Monetary Institute on a consultation from the Council of the European Union under Article 109f (6) of the Treaty establishing the European Community and Article 5.3 of the Statute of the EMI; on a Proposal for a European Parliament and Council Directive on cross-border transfers (COM(94) 436 final) (“the Directive”) (CON/95/3)
Date: 1995-03-20
Institutions: European Monetary Institute
Subjects: capital movement, consumer information, credit transfer, financial transaction, single market, third stage of EMU

OPINION OF THE EUROPEAN MONETARY INSTITUTE

on  a  consultation  from  the  Council  of  the  European  Union  under  Article  109f  (6)  of  the  Treaty

establishing the European Community and Article 5.3 of the Statute of the EMI;

on a Proposal for a European Parliament and Council Directive on cross-border transfers (COM(94)

436 final) (“the Directive”).

CON/95/3

1

The  present  consultation  was  initiated  on  2nd  February  1995  by  the  Council  of  the  European

Union which, for this purpose, transmitted to the EMI a Proposal for a European Parliament and

Council  Directive  on  cross-border  transfers  (“the  Directive”)  as  laid  down  in  document

COM(94)436 final.

2

The  principal  objective  of  the  Directive  is  to  ensure  that  in  the  internal  market  cross-border

credit transfers may be made free of any impediment. In this sense, the Directive is intended to

serve as a support measure for the free movement of goods, persons, services and capital, while

at the same time ensuring a high level of consumer protection. The Directive is also intended to

be a sequel to the freedom of capital movements achieved during Stage One of Economic and

Monetary Union (EMU) and is therefore considered by the European Commission as a further

step towards the progressive implementation of EMU.

3

Under the  Treaty  on  European  Union  the  EMI  is  entrusted  with  the  task  of  promoting  cross-

border  payments  with  a  view  to  Stage  Three  of  EMU.  Although  the  EMI’s  focal  point  is

primarily large-value payments between banks, the Directive, which is mainly intended to apply

to retail payments, is also felt to be important by the EMI, as these two kinds of payments are

interrelated.  The  EMI  shares  the  general  objectives  of  the  Commission  in  the  field  of  retail

cross-border  payments  and  supports  its  wish  to  encourage  the  banking  industry  to  improve  the

transparency and performance and reduce the costs of such payments. In this context, the EMI

also  shares  the  view  of  the  Commission  that  cross-border  payments  are  generally  not  yet

executed  efficiently  enough  to  benefit  fully  from  the  Single  Market  and,  at  a  later  stage,  from

Monetary  Union.  Although  it  is  recognised  that  the  banking  industry  has  made  substantial

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improvements in the situation over the past few years, some time will be needed before cross-

border  retail  payments  in  the  EU  can  match  the  performance  of  domestic  payments.

Nonetheless it is the EMI’s view that a Directive is too heavy a legal instrument to address the

issue  at  this  moment.  Rather  a  non-binding  instrument  (perhaps  in  the  form  of  a  “Charter”)

would be more appropriate as the issues dealt with in the Directive mainly concern the relations

between  banks  and  their  customers,  which  in  most  EU  Member  States  are  governed  by

contracts rather than by binding statutory provisions. However, if the European Parliament and

the  Council  choose  to  adopt  a  legally  binding  instrument  in  the  form  of  a  Directive  (a  political

decision in their realm of competence), some amendments are needed to ensure that it does not

have adverse effects on payment systems.

4

The EMI has  two  major  remarks  on  the  scope  of  the  Directive.  First,  it  should  be  made  clear

that  the  Directive  does  not  apply  to  large-value  payments,  as  the  consequences  of  the

implementation of the Directive for such payments have not been analysed. Indeed, discussions

which  have  taken  place  so  far  between  the  Commission  and  commercial  banks  have  only

focused  on  retail  payments  in  connection  with  the  need  to  protect  consumers  and  small

businesses; in other words the Directive is predominantly about consumer protection.  Moreover,

it  has  never  been  seriously  argued  that  large-value  payments  raise  major  problems  for  the

implementation  of  the  Single  Market.  Secondly,  it  should  be  made  clear  that  the  proposed

Directive  ought  ordinarily  to  apply  only  to  credit  transfers  in  EU  currencies  and  in  ECUs,  as

transfers  in  a  non-EU  currency  are  likely  to  involve  one  or  more  non-EU  credit  institutions,  to

which the Directive cannot apply.

5

Finally, detailed remarks on some of the issues raised in the proposed Directive are given below:

(a)  Although  the  EMI  agrees  in  general  with  the  definitions  provided  in  the  proposed

Directive, the definition of “other institutions” does not specify which types of institutions

are  covered.  In  particular,  it  should  be  made  clear  that  the  definition  does  not  cover

central banks.

(b)

It is suggested that the wording of Article 4 (Information subsequent to a credit transfer)

be  slightly  amended  so  that  the  second  indent  reads  “...  the  amount  of  any  charges

payable  by  its  customer.  The  original  amount  of  the  credit  transfer  and  any  charges

payable by the beneficiary should be separately specified”.

(c) Articles 5 to 7 impose a strict liability on the originator’s bank in every respect. The EMI

is doubtful whether the Directive should impose on the originator’s bank a strict liability to

-   3   -

the originator for the proper execution of a cross-border credit transfer, unless provision is

made in the Directive for the following:

-

first, possible contractual rights should be preserved for the originator’s bank  to  have

recourse to any intermediary bank for recovery of any sum which becomes payable to

the originator (under the terms of the Directive) as a result of any error or omission by

such an intermediary;

-

second, the originator’s bank should not be made liable for the acts or omissions of the

beneficiary  bank,  or  for  an  error  of  an  intermediary  bank  imposed  by  the  beneficiary

bank or by the originator;

-

and  third,  the  Directive  should  contain  a  more  appropriate  definition  of  “force

majeure”, where the liability of the originator’s bank does not apply. The insolvency of

an  intermediary  institution  is  presently  excluded  from  the  definition.  In  this  respect,  it

may  be  mentioned  that  the  originator  may  choose,  either  directly  or  indirectly,  the

intermediary institution. A bank should be able to protect itself against liability if forced

to deal with a counterparty which it considers to be of doubtful creditworthiness. This

could  be  achieved  through  a  provision  which  allows  banks  in  such  circumstances  to

advise  the  customer  of  the  risk  and  to  exclude  liability  if  a  customer  nevertheless

wished to proceed.

20th March 1995