Committee of Permanent Representatives approves six-month extension proposal to new payments legislation
30 January 2014
On 22 January 2014, the (COREPER) approved the final compromise text relating to the European Commission's proposal to amend the Single European Payments Area (SEPA) Migration Regulation (Regulation 260/2012).
On 9 January, the European Commission had proposed an extension to the deadline for compliance with SEPA to 1 August 2014, following growing evidence that many businesses were struggling to meet the February 2014 cut-off date.
Under SEPA, all European businesses must make and receive payments using International Bank Account Numbers (Ibans) and the ISO2022 XML format, standardising payments across the bloc.
This will be a significant change from the past whereby European countries all used different ways of processing commercial payments.
Why was the extension proposal approved?
Due to some Member States' businesses lagging behind in becoming SEPA-compliant, the Commission's recommendation made great practical sense as it aimed to minimise the threat of disturbances to payments.
If banks and payment services providers were required to stop processing payments that differed from the SEPA format as of 1 February 2014, crucial payments of salaries, utility bills and insurance could have been brought to a sudden halt.
Now there is legal certainty surrounding the exact deadline of Regulation 260/2012, businesses can focus on making sure that migration to SEPA is achieved as soon as possible - and by 1 August at the very latest.
What do the latest statistics show about migration levels to SEPA?
According to the European Central Bank, migration to SEPA gathered pace strongly in December. Figures provided by national central banks show that by the end of December 2013, 74% of SEPA credit transfers (SCT) in the euro area were already SEPA-compliant (up from 64% in November).
For SEPA direct debits (SDD), the figure stands at 41%, a steep increase from the 26% registered in November.
However, it was clear to the European institutions that the SCT and SDD schemes were going to be far from harmonised by February, with significant disparities expected between Member States.
Why have migration levels not been as high as expected?
Arguably, dealing with the global financial crisis instead has occupied the thoughts of boardrooms until now.
Alternatively, perhaps there were too many financial institutions who were unsure whether the initial migration date of 1 February 2014 applied to them, so did not start planning for SEPA migration and did not advise or guide their corporate clients with any great urgency.
The cost of investing in new technologies and the time involved in listing all of the processes (payments, collections, payroll etc) that needed to be converted to SEPA were also major factors behind the delay.
Now graced with this postponement, SEPA migration should become a key focus for those responsible in their organisations.
For more information please contact Robert Bond, Partner