Report from the Commission to the European Parliament and the Council of […] on the application of Regulation (EC) No 2560/2001 on cross-border payments in euro {SEC(2008) 141}
Date: 2008-02-11
Institutions: European Commission
Subjects: European Economic Area, balance of payments, bank charges, consumer information, electronic money, exchange of information, payment

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 11.2.2008 
COM(2008) 64 final 

Report from the Commission to the European Parliament and the Council 

of […] 

on the application of Regulation (EC) No 2560/2001 
on cross-border payments in euro 

{SEC(2008) 141} 

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1. 

2. 

3. 

4. 

5. 

6. 

7. 

TABLE OF CONTENTS 

Introduction .................................................................................................................. 3 

Review clause............................................................................................................... 3 

Difficulties encountered in application of Regulation 2560 ........................................ 4 

3.1. Geographic scope of application........................................................................... 4 

3.2. Credit transfers ...................................................................................................... 4 

3.3. Cash withdrawals in ATMs................................................................................... 6 

3.4. Card payments....................................................................................................... 6 

3.5. Competent authorities and out-of-court redress bodies ........................................ 6 

Consumer awareness.................................................................................................... 7 

Impact of Regulation 2560 on charges for cross-border payments.............................. 8 

Impact of Regulation 2560 on charges for national payments..................................... 8 

Changes in cross-border payment system infrastructures............................................ 8 

7.1. Single Euro Payments Area (SEPA) ..................................................................... 8 

7.2. Payment Services Directive (PSD) ....................................................................... 9 

7.3. The impact of SEPA and PSD on the Internal Market.......................................... 9 

7.4. SEPA, PSD and Regulation 2560: the direct debit issue ...................................... 9 

8. 

Advisability of improving consumer services by strengthening 
the conditions of competition..................................................................................... 10 

8.1. Results of the inquiry into the European retail banking sector ........................... 10 

8.2. Way forward........................................................................................................ 11 

9. 

National reporting obligations for balance of payments statistics ............................. 11 

9.1. Regulation 2560 and balance of payments (BoP) statistics ................................ 11 

9.2. Balance of payments collection systems in the Member States.......................... 12 

9.3. Reporting obligations and SEPA ........................................................................ 12 

9.4. Advisability of increasing or removing the reporting threshold ......................... 12 

10. 

Conclusions ................................................................................................................ 13 

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Report from the Commission to the European Parliament and the Council 

of […] 

on the application of Regulation (EC) No 2560/2001 
on cross-border payments in euro 

(Text with EEA Relevance) 

1. 

INTRODUCTION 

Regulation (EC)  No 2560/2001  of  the  European  Parliament  and  of  the  Council  on  cross-
border  payments  in  euro  (hereinafter  referred  to  as  'Regulation 2560')  was  adopted  on 
19 December 2001 and entered into force on 31 December 2001 

The  main  objectives  of  the  Regulation  were  (1)  to  bring  down  the  charges  for  cross-border 
electronic payment transactions in euro to the same level as charges for domestic payments in 
euro and (2) to encourage the financial services industry to undertake the necessary efforts to 
turn the concept of a 'domestic payment area' for non-cash payments into reality.  

In  December 2006,  the  Commission  published  a  staff  working  document  focusing  on  two 
Regulation-specific issues: whether Regulation 2560 has led to a general reduction in charges 
for cross-border payments and whether it has influenced national prices for payment services.1  

This  final  report  examines  the  most  important  problems  encountered  in  the  application  of 
Regulation 2560  in  the  Member States.  It  includes  recommendations  for  amendments  to  the 
text of the Regulation, in order to address weaknesses identified during the review process, to 
reflect  market  realities  better  and  to  align  its  text  with  changes  introduced  by  the  Payment 
Services Directive (PSD). 

An Annex to this report contains further details and gives additional background information. 

2. 

REVIEW CLAUSE 

Article 8 (Review Clause) of Regulation 2560 requires the Commission to prepare a report on 
its application. The main findings on the application of the Regulation in the Member States 
are included in Sections 3–5 of this report. Sections 6–9 analyse specific issues singled out for 
examination in the Review Clause and Section 10 concludes the report.  

The  report  and  the  accompanying  Annex  present  the  Regulation-related  issues  in  the  wider 
perspective  of  the  developments  in  the  European  payments  markets,  which  is  necessary  to 
fully understand the issues under discussion and the intention of the Commission's proposals. 
They also take into account the citizen dimension of the Regulation, as it is the EU consumer 
who is the main beneficiary of this law.  

1 

Commission Staff Working Document addressed to the European Parliament and to the Council on the 
impact  of  Regulation (EC)  No 2560/2001  on  bank  charges  for  national  payments,  SEC(2006) 1783, 
18.12.2006. 

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3. 

DIFFICULTIES ENCOUNTERED IN APPLICATION OF REGULATION 2560 

3.1. 

Geographic scope of application 

The  Regulation  applies  when  a payment  is  made  in  euro  between  two  European  Economic 
Area (EEA) Member States.2  
The provisions of Regulation 2560 were extended to all EEA Member States by a Decision of 
the  EEA  Joint  Committee  No 154/2003  of  7 November 2003,  amending  Annex XII  to  EEA 
force  on 
Agreement 
8 November 2003.3  The  Regulation  is  applicable  to  Iceland  and  Norway  from  that  day, 
whereas credit institutions in Liechtenstein were exempted from the obligations provided for 
in Article 3 of the Regulation until 1 July 2005. 

(Free  Movement  of  Capital).  The  Decision  entered 

into 

Article 9  of  the  Regulation  states  that  it  shall  apply  to  cross-border  payments  made  in  the 
currency of another Member State when the latter notifies the Commission of its decision to 
extend the Regulation’s application to its currency. The Swedish authorities decided to extend 
the Regulation's application to the Swedish kronor (SEK) as of 25 July 2002.4  

3.2. 

Credit transfers 

From  the  time  of  its  entry  into  force,  the  Commission  has  received  hundreds  of  enquiries 
about  Regulation 2560  (information  requests,  questions  about  its  applicability  to  different 
payment  transactions,  demands  for  interpretation,  complaints  etc.).5  Around  90%  of  the 
enquiries  raised  a  number  of  specific  issues  related  to  the  pricing  and  execution  of  credit 
transfers. This report seeks to provide clarifications of the most important enquiries received. 
These  observations  are  preliminary  and  shall  be  without  prejudice  to  any  possible  future 
interpretation by the European Court of Justice regarding the matters concerned. 

Over the last four years the Commission received a substantial number of letters concerning 
the different charging options used by banks. These are: 'OUR' (all charges are borne by the 
originator), 'BEN' (all charges are borne by the beneficiary) and 'SHARE'(charges are shared 
between the originator and the beneficiary). 

It should be noted that the use of all three cost options is covered by Regulation 2560. There 
is no rule in Community law giving preference to one option over the other. However, charges 
for  cross-border  payments  in  euro  should  correspond  to  the  prices  for  domestic  transfers  in 
euro,  accordingly  for  each  cost  option.  In  the  euro area  domestic  transfers  are  generally 
executed by default as SHARE, with no other cost options available. In most situations cross-
border transfers within the euro area should be therefore also executed by default as SHARE 
(no other cost option should be proposed to customers).6 

2 
3 
4 

5 

6 

Currently EU27 + Iceland, Liechtenstein and Norway. 
OJ L 41, 12.2.2004, p. 47. 
Svenska  författningssamlig  (SFS)  of  24.6.2002.  Communication  from  the  Commission  pursuant  to 
Article 9 of Regulation 2560/2001, OJ C 165, 11.7.2002. 
The number of written enquiries average 150 per year, around 85% of them are complaints. It should be 
highlighted that true irregularities or breaches were revealed only in a limited number of cases and these 
were dealt with in close cooperation with Member States authorities. 
The situation is usually different in non-euro area countries, where different cost options are frequently 
offered for domestic euro transfers. 

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The problem appears when banks offer to their customers the possibility of choosing between 
'OUR', 'BEN' and 'SHARE' although such a choice may not be given for domestic payments. 
In  such  situations  the  Commission  is  of  the  opinion  that  charges  for  cross-border  credit 
transfers should not differ from the charges actually applied for domestic credit transfers7. 

The PSD addresses this issue by making the use of 'SHARE' for all national and cross-border 
payment transactions obligatory.8 The Commission believes that an appropriate amendment of 
the text of Regulation 2560 should be proposed in order to provide consistency with the PSD.  

Other problems appear mainly when credit transfers are executed between euro and non-euro 
Member States.  If  the  payment  is  routed  through  an  intermediary  (a  correspondent  bank) 
additional  charges  are  sometimes  deducted  either  from  the  transferred  amount  itself  or,  in 
a separate  transaction,  from  the  beneficiary  account.  It  must  be  clearly  stated  that  such 
additional  charges,  if  applied  to  cross-border  payments,  would  constitute  a  breach  of  the 
Regulation. The method of executing an international payment is a commercial choice made 
by a bank. The consumer should not have to bear the cost of this choice on the grounds that 
the  international  means  of  performing  the  payment  differs  from  the  national  one.  To  curtail 
such  practices,  the  Payment  Services  Directive  introduces  the  'full  amount  principle', 
according to which the full amount specified in a payment order shall be credited, without any 
deduction from the amount paid, to the beneficiary.9  

Where a credit transfer cannot be executed correctly and straight-through-processing (STP) is 
not  possible,  banks  commonly  charge  reject,  return  or  repair  fees.  These  fees  do  not  fall 
within  the  scope  of  Article 3  of  Regulation 2560,  but  they  are  covered  by  Article 4  – 
Transparency of Charges. It seems that in many cases consumers are either poorly informed 
or not informed at all about the existence of such fees, which may be seen as contrary to the 
principles of Regulation 2560. This problem is addressed in the Payment Services Directive, 
which stipulates that a customer may be charged for rejection of the transfer by his bank (no 
intermediary or beneficiary bank charges) only if he previously agreed to pay for such charges 
(when the contract was signed or modified) and only for objectively justified reasons, in line 
with the bank's real costs.10 

Another  difficulty  that  arises  in  a  number  of  Member States  (particularly  in  France)  is  the 
issue of cross-border internet credit transfers, which remain largely unavailable, in contrast to 
domestic internet payments. The policy of limiting the range of e-banking options to national 
credit transfers is not in itself a breach of the Regulation. Nonetheless, offering cross-border 
credit  transfers  through  only  one  access  channel  which  is  invariably  more  expensive  for 
customers, could  be seen, in  absence of any legitimate  reasoning  behind  such behaviour, as 
circumventing Regulation 2560. Moreover, such differentiation of domestic and cross-border 
transfers may also suggest the existence of a potential competition problem. The Commission 
and  the  national  competition  authorities  will  remain  vigilant  to  ensure  that  institutions 

7 

8 

9 
10 

See Note on practical aspects of the implementation of Article 3 of Regulation (EC) No 2560/2001 and 
the  notion  of  'corresponding  payments'  for  credit  transfers,  European  Commission,  10.3.2004.  This 
interpretative note shall be read without prejudice to the definitive interpretation of European Court of 
Justice. 
Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment 
services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC 
and 
http://europa.eu.int/eur-
lex/lex/JOHtml.do?uri=OJ:L:2007:319:SOM:EN:HTML. Article 52(2) refers to charges. 
Cf. footnote 8, Article 67. 
Cf. footnote 8, Article 52(1). 

5.12.2007, 

OJ L 319, 

repealing 

Directive 

97/5/EC, 

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offering  cross-border  credit  transfer  services  through  channels  other  than  domestic  credit 
transfers do not do so in violation of the competition law. 

Finally it should be noted that a number of banks in non-euro area countries have apparently 
applied  the  provisions  on  cross-border  credit  transfers  in  a  way,  which  is  contrary  to  the 
intention  of  the  legislators.  Instead  of  bringing  down  charges  for  cross-border  payments  in 
euro to the level of charges for national payments in euro the opposite phenomenon may have 
been observed.11  

3.3. 

Cash withdrawals in ATMs 

When  the  Regulation  entered  into  force  some  confusion  surrounded  the  issue  of  fees 
applicable  for  cross-border  withdrawals  of  euro  notes  through  Automatic  Teller  Machines 
(ATM) dispensers. Any fee applied to a cross-border ATM withdrawal should not exceed the 
fee  applied  to  domestic  euro  withdrawals  through  a different  ATM  network  (or  a  fee  for  so 
called 'off-us' withdrawal).12  

It  should  be  also  noted  that  an  ATM  withdrawal  of  euros  in  a  non  euro-area  country  is 
a corresponding  payment  for  the  ATM  withdrawal  of  euros  in  the  euro area,  within  the 
meaning  of  the  Article 3  of  the  Regulation.  ATM  operators  and  banks  in  non-euro  area 
countries have to ensure that they apply the same charges – if any – on ATM withdrawals of 
euros both in their home countries and in the euro area Member States. However, it does not 
imply in any way that euro withdrawals need to be subject to a charge.13  

3.4. 

Card payments 

Payments  by  cards,  whether  debit  or  credit,  have  not  raised  many  problems  under 
Regulation 2560. The only major issue relates to surcharging on payments with cards at the 
point-of-sale.  However,  surcharges  on  card  payments  remain  outside  the  scope  of 
Regulation 2560, as they concern consumer to merchant relations. 

The  issue  of  surcharging  or  offering  a  discount  on  a  given  payment  instrument  has  been 
addressed  in  the  PSD,  in  Article  52(3).  It  is  worth  noting  that,  if  a  surcharge  is  applied  to 
a card payment, there should logically be no discrimination between cards issued by domestic 
financial institutions and those issued by institutions located in other Member States.  

3.5. 

Competent authorities and out-of-court redress bodies 

Regulation 2560  does  not  oblige  Member States  to  establish  or  indicate  the  competent 
authorities to deal with cases of its erroneous application.  

As mentioned before, the Commission has received hundreds of enquiries concerning cross-
border payment services. To deal more effectively with this correspondence, the Commission 
asked  Member States  to  provide  it  with  the  details  of  their  respective  dispute  settlement 
systems, if available. The contributions received were far from complete and, in many cases, 
became  obsolete  quickly,  due  to  changes  in  the  contact  details  and  competences  of  the 
schemes.  Furthermore,  wide  discrepancies  between  the  powers  and  practices  of  existing 
schemes  were  revealed,  questioning  in  some  cases  their  ability  to  effectively  solve 
Regulation-related cross-border disputes. 

11 

12 

13 

Reliable  data  on  fees  before  and  after  the  application  of  Regulation  in  non-euro  Member States  (and, 
more specifically, new Member States) are scarce. Nevertheless, such incidents may be identified in at 
least 6 non-euro area countries.  
See:  http://ec.europa.eu/internal_market/payments/docs/reg-2001-2560/reg-2001-2560-article3_en.pdf, 
p. 13. 
The Commission has accordingly informed members of the PSGEG group in a letter of 14 May 2007. 

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As  a  result,  in  some  countries  the  complainant  still  has  to  go  to  court  to  seek  any 
compensation. For a customer domiciled in another state, this is difficult and questionable in 
terms of cost/benefit. 

The absence of reference to the competent authorities and out-of-court redress bodies can be 
seen  as  an  evident  weakness  of  Regulation 2560.  In  order  to  provide  consistency  and 
a uniform application of the European payment legislation, an amendment to the Regulation 
should  be  made,  stating  that  competent  authorities  and  redress  bodies  established  for  the 
purposes of the PSD should also be responsible for Regulation-related issues.14 

4. 

CONSUMER AWARENESS 

In accordance with Article 4 of Regulation 2560 consumers need to receive prior information 
on  charges  levied  for  cross-border  payments  and  on  their  subsequent  modifications.  This 
article  guarantees  the  transparency  between  domestic  and  cross-border  charges,  and  the 
possibility to check if the Regulation is applied correctly.  

Results of the review process and of the stakeholders' consultation indicate that provisions of 
Article 4  are,  in  general,  properly  implemented  by  the  banking  industry.  Information  on 
charges is provided to customers in a variety of different ways, e.g. through the internet, tariff 
lists  displayed  in  bank  premises,  information  brochures  and  leaflets,  call  centres  as  well  as 
directly  at  the  counter.  Such  information  appears  to  be  generally  available  for  customers  to 
consult should they so wish. In some countries, such as Spain and Ireland, the regulator has to 
be informed of prices. Customers also appear to receive the necessary information about any 
modification to the applicable charges.  

Consumer  rights,  transparency  of  conditions  and  provision  of  information  for  electronic 
payment transactions will be further enhanced when the PSD enters into force (Title III).  

Evidence indicates that consumers are not always fully satisfied with the way information is 
provided. Consumer organisations and national authorities suggested that on some occasions 
the  information  may  be  too  complex  for  average  customers  to  understand  and  could  be 
simplified. A difference between the publication of obligatory information and its meaningful 
character ('readily comprehensible form') was also highlighted. 

Knowledge  of  the  Regulation's  existence  and  of  its  scope  is  often  limited,  incomplete  or 
inaccurate  among  the  general  EU  population.15  In  some  euro  area  Member States  close  to 
70%  of  consumers  do  not  know  if  there  are  extra  fees  for  withdrawing  money  or  using 
a payment  card  in  another  Member State.  In  this  context,  it  is  clear  that  banks,  media  and 
public  authorities  should  make  a  better  effort  to  communicate  the  advantages  of  the 
Regulation to the general public. On the other hand, it should be borne in mind that a large 
proportion  of  the  EU  citizens  (all  those,  who  do  not  travel  abroad  or  make  cross-border 
payments) are not affected by Regulation 2560. 

14 

15 

Cf.  footnote  8,  Articles  80–83.  It  should  be  noted  that  Regulation  (EC)  No  861/2007  on  a  European 
Small Claims Procedure will create a uniform EU-wide procedure for civil and commercial claims not 
exceeding  EUR 2 000.  This  procedure  should  be  available  from  1 January 2009  and  may  be  used  for 
payments-related claims, too. 
See for example results of the Flash Eurobarometer 193, September 2006: 
http://ec.europa.eu/public_opinion/flash/fl193_en.pdf 

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5. 

IMPACT OF REGULATION 2560 ON CHARGES FOR CROSS-BORDER PAYMENTS 

The principle objective of Regulation 2560 – to equalise the prices for corresponding cross-
border and domestic payments up to EUR 50 000 – has been achieved, as already described in 
the report on bank charges for national payments.  

The  cost  of  a  cross-border  credit  transfer  in  the  euro area  has  fallen  significantly  since  the 
entry into force of Article 3(2) of the Regulation. Overall, the costs of regulated transfers have 
fallen  in  all  euro area  Member States.  Costs  of  cross-border  credit  transfers  in  euro  have 
remained largely the same in non-euro Member States.  

The  costs  of  cross-border  card  payments  have  not  changed  since  the  introduction  of 
Regulation 2560 and the costs of cross-border ATM withdrawals have been brought into line 
with the cost of domestic 'off-us' withdrawals. The cross-border ATM withdrawals constitute 
usually  only  a minor  percentage  of  total  withdrawals.  Banks  were  therefore  pressed  by 
consumers to adjust their prices for cross-border withdrawals to the domestic levels. While no 
separate data set is available on fees for cross-border ATM withdrawals before and after the 
introduction  of  Regulation 2560,  available  information  and  anecdotal  evidence  suggest  that 
fees for withdrawals with debit cards have decreased, while fees for withdrawals with charge 
and credit cards have largely remained stable.  

6. 

IMPACT OF REGULATION 2560 ON CHARGES FOR NATIONAL PAYMENTS 

The  Commission  Staff  Working  Document  on  bank  charges  for  national  payments  was 
published on 18 December 2006.16 Its main conclusion is that Regulation 2560 has not led, as 
was initially feared, to any substantial increase in charges for national payments.  

7. 

CHANGES IN CROSS-BORDER PAYMENT SYSTEM INFRASTRUCTURES 

7.1. 

Single Euro Payments Area (SEPA) 

One  of  the  main  objectives  of  Regulation 2560  was  to  encourage  the  financial  services 
industry  to  modernise  and  develop  more  integrated  payments  infrastructures.  When 
Regulation 2560 was adopted, the necessary infrastructure to process cross-border payments 
efficiently within the EU was not in place. The EU market for payment services was hugely 
fragmented.  Costly  correspondent  banking  arrangements,  low  speed  and  low  reliability  of 
cross-border transfers in addition to the low level of automation resulted in high charges for 
consumers.  Other  electronic  payments  mechanisms  could  not  always  be  used  between 
Member States.  For  instance,  even  today,  direct  debits  cannot  be  used  across  borders,  even 
though they represent a cheap, reliable and secure means of payment. Similarly most national 
debit cards cannot operate across national borders.17 

16 
17 

See footnote 1. 
Unless co-branded with an international scheme (MasterCard or Visa). 

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In March 2002  the European banking industry announced their intention to create, by 2010, 
a Single Euro Payments Area (SEPA). SEPA is an area in which consumers, companies and 
other economic actors will be able to make and receive payments in euro, whether between or 
within national boundaries under the same basic conditions, rights and obligations, regardless 
of their location. It should allow customers to make non-cash electronic euro payments to any 
beneficiary located anywhere in the SEPA area18 using a single bank account and a single set 
of  payment  instruments.  SEPA  payments  in  euro  will  thereby  become  'domestic',  and  there 
will no longer be any differentiation between national and cross border payments within the 
euro area.  
In June 2002 the European Payments Council (EPC)19 , the decision making and coordination 
body  of  the  European  banking  industry  for  payments  services,  was  established.  This 
organisation directs and co-ordinates the work on procedures, common rules and standards for 
three  SEPA  payment  instruments:  credit  transfers,  direct  debits  and  payment  cards.  These 
pan-European  instruments  are,  according  to  the  EPC  road-map,  to  be  offered  to  euro area 
citizens starting in January 2008. The current national instruments will gradually be replaced 
by SEPA instruments based on the common schemes and frameworks.  

Payment Services Directive (PSD) 

7.2. 
The Directive on Payment Services in the Internal Market (PSD)20 is the legal foundation for 
the creation of an EU-wide single market for payments. 

The  PSD  and  the  SEPA  project  together  form  the  cornerstone  of  a  true  Single  Payments 
Market. However, the important difference is that the PSD covers payments made in any EU 
currency and is not limited to the euro.  

The provisions of the PSD are to be implemented by all Member States by 1 November 2009 
at the latest. 

7.3. 

The impact of SEPA and PSD on the Internal Market 

An  integrated  market  with  a  set  of  common  payment  instruments  on  one  side  and  modern 
legal  foundations,  providing  transparency,  equal  access  and  a  level  playing  field  between 
various payment service providers on the other should not only increase competition but also 
stimulate innovation in the payments market. More efficient, pan-European payment systems 
shall bring considerable benefits for the economy and society as a whole (see Annex). 

7.4. 

SEPA, PSD and Regulation 2560: the direct debit issue 

When  the  Regulation  was  adopted,  it  was  decided  that  its  scope  should  cover  all  existing 
cross-border  electronic  payment  instruments.  At  that  time  and  even  now  cross-border  direct 
debits  are  not  available.  However,  with  the  PSD  and  the  adoption  of  the  SEPA  direct  debit 
scheme by the EPC, cross-border direct debits will become a reality from November 2009.  

18 
19 

20 

European Economic Area countries and Switzerland. 
EPC consists of 67 Members, banks and banking associations from the 27 EU Member States as well as 
Iceland, Liechtenstein, Norway and Switzerland. 
As mentioned in Section 3 of this report. See also footnote 8. 

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If no regulatory action is taken, the European consumers will not enjoy the same guarantee of 
equal charges for domestic and cross-border direct debits, as they do for credit transfers and 
card  payments.  Consequently  it  would  be  difficult  to  explain,  why  the  principle  of  no 
discrimination  between  domestic  and  cross-border  electronic  payment  instruments  is 
applicable to some instruments but not to others. Furthermore, for the SEPA project itself, a 
difference in pricing could well lead to a delayed migration from existing national direct debit 
schemes  and  to  difficulties  in  reaching  a  critical  mass  of  users  of  the  SEPA  Direct  Debit 
scheme. 

The Commission intends to propose an amendment to the Regulation, extending its scope to 
include  direct  debit  transactions.  At  the  same  time  the  Commission  will  carefully  consider 
proposing  other  amendments  that  may  contribute  to  the  achievement  of  the  SEPA  project, 
such as a cut-off date for the phasing out of legacy payment products. 

8. 

ADVISABILITY  OF  IMPROVING  CONSUMER  SERVICES  BY  STRENGTHENING  THE 
CONDITIONS OF COMPETITION 

8.1. 

Results of the inquiry into the European retail banking sector 

One  of  the  aspects  singled  out  for  closer  examination  by  the  Review  Clause  of 
Regulation 2560  is  'the  advisability  of  improving  consumer  services  by  strengthening  the 
conditions of competition in the provision of cross-border payment services'.  

In 2004 the Commission tasked an independent consultant, Retail Banking Research Ltd, to 
prepare  a report  entitled  Regulation 2560/2001:  study  of  competition  for  cross-border 
payment services. This study provided preliminary conclusions on the level of competition in 
the cross-border payments market (i.e. for credit transfers and card payments). In June 2005 
the  European  Commission  launched  an  inquiry  into  the  European  retail  banking  sector, 
analysing, among others, competition in the market for payments cards and payment systems. 
The results of this inquiry were published on 31 January 2007.  

In  the  area  of  credit  transfers  and  direct  debits  the  findings  concentrate  on  governance  and 
access  issues  (e.g.  membership  conditions  and  fee  structure  in  clearing  and  settlement 
systems) and on the existence, in some Member States, of interchange fees. Moreover, several 
significant competition issues are identified in the European payment cards market. From the 
cross-border payment services perspective, the enquiry revealed the existence of:21  

•  barriers to entry into the payments market,  
•  large variations in merchant, cardholder and interchange fees22,  

•  rules, procedures and market structures that weaken competition at the merchant level. 

For details, please refer to the Annex. 

21 

22 

For more information: 
http://ec.europa.eu/comm/competition/antitrust/others/sector_inquiries/financial_services/retail.html. 
Interchange  fee  is  a  fee  paid  by  an  acquiring  institution  to  an  issuing  institution  for  each  payment 
transaction.  In  card  networks  it  is  a  fee  paid  by  the  bank  of  a  merchant  (acquirer)  to  the  bank  of 
a cardholder (issuer).  

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8.2.  Way forward 

Many of the barriers to competition that the sector inquiry found should be remedied through 
the establishment of SEPA and the implementation of the PSD, as described in Section 7 of 
this  report.  Furthermore,  in  some  markets  steps  have  already  been  taken  by  the  industry  to 
modify the structures and to remove barriers to market entry.  

The Commission will continue to screen the situation in the market carefully. The possibility 
cannot be ruled out that, after careful analysis, antitrust enforcement might still be necessary. 
The  European  Commission  will  not  hesitate  to  exercise  its  powers  of  enforcement  under 
Articles 81, 82 and 86 of the EC Treaty, to ensure that the competition rules are respected in 
retail banking.  

The  Commission  has  expressed  its  concern  that  interchange  fees  of  MasterCard  and  Visa 
could jeopardise the achievement of SEPA. In countries where local banks decide to replace 
domestic  debit  cards  with  MasterCard  or  Visa  debit  cards,  the  interchange  fees  of  these 
international  schemes  may  raise  costs  for  businesses  and  consumers.  The  Commission  will 
investigate situations where the SEPA project leads to price increases. The Commission has 
an  open  case  specifically  addressing  interchange  fees  in  the  MasterCard  network.23 
Interchange  fees  in  Visa  network  will  be  subject  to  review  as  the  Visa  exemption  decision 
expires in December 2007.24 

The Commission, together with the national competition authorities, will continue to monitor 
the compatibility of  the SEPA  framework with competition  law, as  requested  by the Ecofin 
Council.  It  will  scrutinize  whether  SEPA  is  implemented  in  a  way  that  supports  more 
effective  competition  and  innovation,  thus  enabling  the  cost  savings  to  be  passed  on  to 
businesses and consumers.  

9. 

NATIONAL REPORTING OBLIGATIONS FOR BALANCE OF PAYMENTS STATISTICS  

9.1. 

Regulation 2560 and balance of payments (BoP) statistics 

Article 6 of Regulation 2560 requires Member States to remove national reporting obligations 
for  cross-border  payments  up  to  EUR 12 500.  Any  national  obligations  relating  to  the 
minimum information to be provided about the beneficiary and which prevent the automation 
of payment execution must also be removed.  

In accordance with Article 3(3), on 1 January 2006 Regulation 2560 started to apply to credit 
transfers up to EUR 50 000. However, there was no corresponding increase in the exemption 
threshold for the national reporting obligations. Article 8 asks the Commission to examine the 
advisability of increasing the EUR 12 500 threshold to EUR 50 000 with particular reference 
to the impact on 'undertakings'.  
Community legislation25, national legislation and European Central Bank (ECB) acts require 
Member States  to  collect  statistical  data,  including  information  on  the  balance  of  payments. 
Balance  of  Payments  (BoP)  statistics  are  used  for  the  preparation  and  communication  of 
monetary policy. In addition, those statistics are necessary for the computation of key national 
indicators like gross domestic product (GDP) or gross national income (GNI), which play an 

23 
24 
25 

Case COMP 34579. 
Commission Decision of 24 July 2002, OJ L 318, 22.11.2002, p. 17. 
Regulation (EC)  No 184/2005  on  Community  statistics  concerning  balance  of  payments,  international 
trade in services and foreign direct investment. 

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important role in the administrative processes of the EU, such as setting the contributions to 
the EU budget and the excessive deficit procedure. 

Balance  of  payments  statistics  have  been  traditionally  compiled  on  the  basis  of  individual 
settlements  data  generated  by  banks  or  other  institutions.  In  recent  years,  there  has  been 
a trend in a number of European countries to progressively rely more on information reported 
directly  by  enterprises  rather  than  on  data  reported  through  banks  on  behalf  of  their 
customers.  This  trend  was  significantly  reinforced  when  the  reporting  exemption  threshold, 
set in Regulation 2560, entered into force. 

9.2. 

Balance of payments collection systems in the Member States 

As a result of the Regulation, many Member States have decided to reduce the dependence of 
BoP  data  collection  on  payments  reporting  by  banks,  by  introducing  surveys  and/or  direct 
reporting  by  companies.  Between  2001  and  2006  eleven  Member States  changed  their  BoP 
collection systems, while another three announced firm plans for changes after 2006. Whereas 
in  2003  some  40%  of  the  EU-25  Member States  still  relied  mainly  on  bank  settlements  for 
BoP compilation, this share had fallen to 12% by the end of 2006 and is likely to drop even 
further (see Annex). 

At the end of 2006 ten Member States operated a full survey system (i.e. without the use of 
any bank settlement data). In addition, six countries operated mixed systems in which at least 
50% of the BoP items were collected by surveys complemented with bank settlements reports. 
In contrast, only four countries collected BoP data mainly through bank settlements.  

It  should  be  noted  that  the  changeover  to  direct  reporting  and/or  surveys  implies  an  almost 
total  reliance  on  reporting  by  enterprises.  In  this  context,  a  business  register  has  to  be 
maintained and updated. For some Member States, this update may still require the collection 
of  minimum  information  on  resident  institutions  involved  in  cross  border  transactions 
(i.e. international  trade)  that  is  easily  available  at  a  very  low  cost  from  a  bank  settlement 
system. 

9.3. 

Reporting obligations and SEPA 

The  current  situation  of  diverging  reporting  obligations  in  Member States  needs  to  be 
addressed not only to ensure an equal treatment for all payment services providers operating 
in  the  EU,  but  because  it  is  also  a  direct  threat  to  the  SEPA.  The  SEPA  project  envisages 
a complete  abolition  of  the  distinction  between  euro  payments  made  within  and  between 
Member States.  As  a  logical  consequence,  no  specific  provisions  for  BoP  reporting  are 
included in the message standards set for SEPA Credit Transfers and Direct Debits. SEPA, as 
one  domestic  payments  market,  does  not  require  the  collection  of  such  information. 
Furthermore,  the  usefulness  and  accuracy  of  BoP  reporting  based  on  bank  settlements  is 
expected  to  gradually  decline  when  SEPA  becomes  reality,  with  multinationals,  SMEs  and 
individuals being able to make all their payments through one single branch or even one bank 
account in one country, not necessarily that of their physical location. It may not be feasible to 
continue to gather correct BoP and investment statistics data by using bank transaction based 
systems. 

9.4. 

Advisability of increasing or removing the reporting threshold  

Balance of payments compilation methods need to be reconsidered. Member States that still 
apply  BoP  reporting  obligations  (at  least  those  of  the  euro area)  should  be  encouraged  to 
voluntarily  raise  the  exemption  threshold  to  EUR 50 000  as  of  January 2008.  This  would 
allow  for  a  timely  and  smooth  SEPA  launch.  Further  harmonisation  of  methods  of  BoP 
reporting that do not rely on payments based reporting by banks should also be considered. In 

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12 

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particular,  a  dissemination  of  best  practices  on  reporting  systems  that  are  consistent  and  do 
not prevent payment automation shall be encouraged between Member States. 

The Commission  will propose raising  the reporting  exemption threshold in Regulation 2560 
to  EUR 50 000  as  soon  as  possible,  so  as  to  diminish  the  current  discrepancies  and 
competition distortions described above. A proposal for the introduction of a sunset clause in 
the  revised  Regulation,  fixing  a  deadline  (e.g.  2011–2012)  where  banks  would  be  exempt 
from all balance of payments reporting obligations based on settlements is also envisaged.  

At  the  same  time,  the  Commission  intends  to  clarify  the  scope  of  Article 6(1)  of 
Regulation 2560, concerning Member States' obligations. The Commission intends to specify 
that  Article 6(1)  refers  to  the  collection  of  information  from  the  institutions  participating  in 
payment systems and excludes enterprises. Article 6(1) only applies to information related to 
individual  payments  when  ordered  by  the  customers  and  does  not  hinder  the  collection  of 
aggregate data for statistical usage or other readily available information from banks (or other 
institutions involved in the settlement of payments) that does not cause any specific reporting 
burden because a classification by type of underlying transaction is not required. 

10. 

CONCLUSIONS 

Regulation 2560  has  broadly  achieved  its  two  main  objectives.  First,  it  brought  the  costs  of 
cross-border  electronic  payment  transactions  in  euro  into  line  with  the  costs  of  domestic 
payments and triggered an important decrease of fees for cross-border payments, in particular 
for  credit  transfers.  Second,  it  encouraged  the  financial  services  industry,  in  the  absence  of 
an efficient  and  integrated  European  payment  services  infrastructure,  to  undertake  the 
necessary efforts to turn the concept of a 'domestic payment area' for non-cash euro payments 
into reality. 

In light of the conclusions presented in this Report on the application of Regulation 2560, the 
Commission  intends  to  propose  a  number  of  amendments  to  that  Regulation,  in  order  to 
address  weaknesses 
to  better  reflect  market 
developments and to align it with the changes introduced by the PSD. These include: 

the  review  process, 

identified  during 

•  Introduction  of  the  'SHARE'  cost  option  as  obligatory  for  all  regulated  transactions,  (see 

Section 3); 

•  Reference to the competent authorities and out-of-court redress schemes established for the 

purposes of PSD to deal with Regulation issues (see Section 3); 

•  Extension of the scope to cover direct debit transactions (see Section 7); 

•  Increase of the balance of payments reporting exemption threshold up to EUR 50 000 and 
introduction of a deadline for a complete exemption of banks from the balance of payments 
reporting obligations together with clarification of scope of Article 6(1) (see Section 9). 

In  addition,  some  changes  in  the  Article 2  (definitions)  and  in  the  Article 8  (review  clause) 
appear necessary.  

When  formally  tabling  its  proposal,  the  Commission  will  take  into  account  progress  in  the 
ongoing  development  of  SEPA,  and,  as  mentioned  in  Chapter 7.4,  may  propose  some 
additional measures in order to accelerate and facilitate the achievement of the SEPA project. 
Any  amendments  to  the  Regulation  will  be  proposed  to  the  Council  and  the  European 
Parliament once the appropriate impact assessments are finalised.  

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