Opinion of the European Central Bank of 26 October 2001 at the request of the Council of the European Union on a proposal for a regulation of the European Parliament and of the Council on cross-border payments in euro (CON/2001/34)
Date: 2001-10-26
Institutions: European Central Bank
Subjects: European Central Bank, euro, frontier region, international payment

1.11.2001

EN

Official Journal of the European Communities

C 308/17

EUROPEAN CENTRAL BANK

OPINION OF THE EUROPEAN CENTRAL BANK

of 26 October 2001

at the request of the Council of the European Union on a proposal for a regulation of the
European Parliament and of the Council on cross-border payments in euro

(CON/2001/34)

(2001/C 308/15)

from the Council of

1. On 26 September 2001, the European Central Bank (ECB)
the European
received a request
Union for an opinion on a proposal for a regulation of
the European Parliament and of the Council on cross-
border payments in euro (hereinafter referred to as the
(cid:145)draft regulation(cid:146)). Its main intention is the establishment
of the principle that charges levied by an institution in
respect of cross-border payments in euro will be the same
as the charges levied by the same institution for corre-
sponding domestic payments.

2. The ECB’s competence to deliver an opinion is based on
the first indent of Article 105(4) of the Treaty establishing
the European Community (hereinafter referred to as the
(cid:145)Treaty(cid:146)), and Article 3.1, Article 4(a) and Article 5 of the
Statute of the European System of Central Banks and of
regulation
the European Central Bank, as
contains provisions concerning the smooth operation of
payment systems and the collection of balance-of-payment
statistics. In accordance with the first sentence of Article
17.5 of the Rules of Procedure of the European Central
Bank, this opinion has been adopted by the Governing
Council of the ECB.

the draft

is

located. The draft

3. The draft regulation provides that charges levied by an
institution in respect of cross-border payments in euro
up to EUR 50 000 shall be the same as the charges
applied by the same institution in respect of corre-
sponding payments within the Member State in which
the establishment of that institution executing the cross-
border payment
regulation is
envisaged to apply from 1 January 2002 to cross-border
electronic payment transactions,
that is in principle to
card payments and cash withdrawals at cash dispensing
machines, and from 1 January 2003 to cross-border credit
transfers and cross-border cheques. The draft regulation
also contains provisions obliging institutions to provide
their customers with prior information on charges in
it contains
the interests of
straight-through-
measures
imposing a
processing of cross-border payments by

transparency.

In addition,

automated

facilitating

the relevant

to
mutual obligation on institutions and customers
International
communicate to each other
Bank Account Number (IBAN) and the Bank Identifier
Code (BIC) upon request. The draft regulation also estab-
lishes
reporting threshold for balance-of-payment
statistics of EUR 12 500 from 1 January 2002, and
increases it to EUR 50 000, as from 1 January 2004.

a

4. The draft regulation is based on Article 95(1) of

the
(cid:145)adopt the
Treaty, according to which the Council shall
the provisions laid
measures for the approximation of
regulation or administrative action in
down by law,
Member States which have as their object
the estab-
lishment and functioning of the internal market(cid:146). With
regard to the choice of
the ECB would
welcome an assessment by the Council of compatibility
of
the draft regulation with the principle of an open
market economy with free competition as laid down by
Article 4(1) of the Treaty, with the right of property and
with the principle of proportionality.

legal basis,

5. Articles 1 to 3 of the draft regulation provide for the
alignment of charges
for cross-border and domestic
payments in order to establish a single payment area for
the euro. In that sense, the objective of the draft regu-
lation is fully in line with the policy pursued by the Euro-
system since the publication of
its 1999 report on
(cid:145)Improving cross-border retail payment services: the Euro-
system’s view(cid:146), i.e. the creation of a single payment area
for the euro. In this respect, the ECB shares the view that
the notion of (cid:145)border(cid:146) should not be in itself a factor that
justifies differences between payments in the euro area.
The ECB has always promoted an integrated payment
the euro where the differences in cost and
area for
cross-border
domestic
convenience of making
should reduce substantially and eventually
payments
disappear. Furthermore,
in line with the tasks entrusted
to it by the Treaty, the ECB also shares the view stated
in the explanatory memorandum according to which the
creation of a single payment area for the euro is desirable

and

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Official Journal of the European Communities

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the market

the public in the single
to enhance the confidence of
currency. The ECB remains therefore firmly committed
to the ultimate purpose of a fully integrated single
payment area for the euro. However, while sharing the
objective of the draft regulation, the ECB would like to
emphasise its reservations against a regulation influencing
prices for services which risks disruption of the working
economy. Whilst understanding the
of
underlying considerations for the draft regulation,
the
ECB would favour addressing the economic issue by
time limit
allowing banks a longer, albeit definite,
to
in line with the
adjust
their prices progressively
progressive decrease of
the
proposed pricing laid down in the draft regulation will
existing fragmentation of payment
not
channels and costly interbank processing of cross-border
payments (cid:151) which are some of the main reasons for the
high charges.
the draft regulation
addresses only the consequences of the underlying inef-
ficiencies and not their causes.

In this perspective,

their cost base.

remedy the

Indeed,

while in others charges are quite high. An undesirable
effect of the draft regulation could be a prolongation of
the current disparities between countries and persistence
of price differences
for cross-border payments across
different euro area countries.

8.

In addition,
the ECB notes that at present, practices
concerning who is actually charged for domestic credit
transfers, sender, beneficiary or both, may differ amongst
Member States. Therefore, transposition of this domestic
practice to cross-border payments between countries with
a different practice is not straightforward. It is also not
clear whether the draft regulation leaves any freedom to
agree between sender and receiver on who bears the cost
of the transfer. Moreover, further consideration should be
paid to the relationship between the draft regulation and
Directive 97/5/EC of the European Parliament and of the
Council of 27 January 1997 on cross-border credit
transfers (1).
in this respect. More generally, a standard-
isation of practices regarding charges could prove to be
appropriate and should be investigated.

6.

substantial

In this respect, the following general comment addresses
the timing of entry into force of the draft regulation. The
ECB has been working intensively with the banking sector
since 1999 as a catalyst for change. Since then, progress
has been made and obstacles that were identified as
hampering cross-border payments have been removed.
that (cid:151) as a result of
the ECB expects
Therefore,
implementation of measures (cid:151) a
fee
reduction for cross-border payments should already take
place from 1 January 2002. A fully integrated single
payment area, necessary for full equalisation of prices on
a sound cost and production basis, should follow in a
second step within a timeframe as short as realistically
possible allowing for necessary structural adjustments.
However,
transfers, banks need
credit
additional time, for example until 2005, to put in place
the necessary infrastructure and logistics to allow for an
equalisation of prices between
economically
should be
domestic
considered that while consolidation of
the payment
systems infrastructure following the introduction of the
euro has already occurred for the large-value transfer
systems,
retail
payments is not yet in place. Consolidation in this field
is expected to start after the final changeover to the euro.

pan-European

infrastructure

cross-border

transfers.

viable

least

and

for

for

at

It

a

this payment

9. The ECB agrees that the creation of a single euro payment
area calls for improved procedures for cash withdrawal,
card payments and credit transfers. However, Article 3
includes also cheques in the scope of the draft regulation.
the ECB recognises that cheques still play an
Whilst
it is of the
important role in a few national markets,
view that any measures which could foster the cross-
border use of
should be
avoided. In view of its statutory mandate to ensure the
smooth functioning of payment systems, the ECB would
instead discourage the cross-border and domestic use of
cheques in favour of more secure and efficient means of
payment, one reason being that cheques are paper-based
and cannot be processed as efficiently as electronic
payment instruments. Also,
introducing cheques in the
to
scope of
invest in infrastructure to handle cross-border cheques,
while the banks must at the same time invest heavily in
improving the processing of cross-border credit transfers.

regulation would force banks

instrument

the draft

7. Furthermore,

the ECB is of

the opinion that aligning
charges for domestic and cross-border payments at a
in time may eventually trigger some
premature point
counterproductive reactions from institutions, such as a
decreasing supply of cross-border payment services or
an increase of domestic fees or of the fees charged for
in some countries domestic
other services. Moreover,
low charges,
credit

transfers are free of charge or at

10. The ECB welcomes the initiative in Article 4 of the draft
regulation to foster the transparency of
fees levied on
cross-border payments and payments effected within the
Member State in which an institution is established. This
Article will enhance competition, contribute to the estab-
lishment of a single payment area and improve the
advantages for consumers in the internal market.

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

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11. Article 5 of the draft regulation imposes a mutual obli-
gation on institutions and customers to communicate their
international bank account number (IBAN) and the bank
identifier code (BIC) to each other upon request. The ECB
has always promoted standards as a means of facilitating
the execution of cross-border payments. It has initiated
discussions and worked intensively with the banking
sector in order to introduce standards such as the IBAN.
Therefore, the ECB shares the objective of Article 5 of the
draft regulation to accelerate and facilitate the implemen-
tation of defined standards. However, the ECB suggests
that sufficient
flexibility should be provided for future
developments of technical standards to ensure the effi-
ciency of payment systems in the long-term. Finally, it is
noted that the draft regulation does not allow time for the
institutions and their customers to comply with Articles 4
and 5. The Council may wish to consider whether this will
be feasible in practice.

for

statistics.

balance-of-payment

12. According to Article 6(1) of the draft regulation, Member
States shall by 1 January 2002 remove any national
reporting obligations for cross-border payments up to
EUR 12 500
The
threshold will be increased to EUR 50 000 from 1
January 2004. The Committee on Monetary, Financial
and Balance of Payments Statistics (CMFB) agreed in
June 2000 on a common exemption threshold of
EUR 12 500 from 1 January 2002 for those Member
States making use of
settlement-based reporting by
their customers. The amount was
banks on behalf of
chosen to relieve almost all
retail cross-border and
from balance-
around two-thirds of all
of-payments statistical reporting. With the EUR 12 500
threshold,
in
practice exempt from any reporting burden. The ECB is
of the opinion that a premature increase of the threshold
increase substantially the
to EUR 50 000 would not
proportion of cross-border
transactions exempted but
would have a severe impact on the quality of statistics
through the
some
balance of payments items, mainly services, income and
transfers. Accurate balance-of-payments data are required
a deterioration in
for decision-making.
In addition,
national balance-of-payments data would reduce
the
quality of national account aggregates, notably gross
income. A radical
domestic product and gross national

information concerning

cross-border payments

transactions

consumer

loss of

are

particular.
thresholds

reform of the data collection systems in some Member
States to maintain data quality would take time and
probably add directly to the reporting burden on small
A
and medium-sized
in
enterprises
for
system, with separate
two-threshold
payments within and outside the EU (cid:151) an approach
which could limit
the impact on balance-of-payments
the euro area as a whole (cid:151) might be
statistics of
cumbersome and add to banks’
reporting costs. For
these reasons, the ECB strongly recommends postponing
the increase in the threshold to EUR 50 000 to 2006 to
allow sufficient time for the development of alternative
sources. The draft regulation should also make clear that
the threshold applies to reporting by banks of cross-
border payments initiated by their customers, and is
without prejudice to the obligation to meet the statistical
requirements set out in the ESA95 Regulation. The ECB
also suggests postponing until 2004 the removal of obli-
gations as to the minimum information concerning the
data of
the beneficiary which prevent automation of
payment execution contained in Article 6(2) of the draft
regulation, as this may in particular entail consultation of
various parties at the national level.

13. Regarding the application of the draft regulation in the
three
and
countries not participating in economic
monetary union, there appears to be a need for further
clarification. As the euro will remain a foreign currency in
these countries,
to determine the
it might be difficult
adequate reference to an equivalent domestic payment,
i.e. whether,
the comparator would be
either a transfer in the domestic currency or a transfer
in euro within the
same non-participating country.
Similarly, it is unclear what will be the reference charge
for a cash withdrawal in one of these countries.

instance,

for

14. This opinion shall be published in the Official Journal of the

European Communities.

Done at Frankfurt am Main, 26 October 2001.

The President of the ECB

Willem F. DUISENBERG