Treasury Today Country Profiles in association with Citi

SEPA migration

This month’s question

“Now that migration to SEPA is going to be mandatory, what can corporations do to benefit from SEPA and ensure a smooth transition?”

Portrait of Ruth Wandhöfer
Ruth Wandhöfer, Head of Payments Strategy and Market Policy at Citi, responded:

“With SEPA (Single Euro Payments Area) transactions – euro credit transfers and euro direct debits – still growing at too slow a pace in the market, clarity on when national retail payment schemes in the Eurozone would need to close down to make way for the new ISO standards-based SEPA schemes was sought by all stakeholders across the European markets. To that end the EU Commission finally proposed a Regulation on 16th December 2010 and so it looks like an end-date for migration to SEPA might be in sight at last. However, detailed negotiation will take place with the European Parliament and Council over the next few months to agree a final version.

The current proposal envisages two end-dates, 12 months after the Regulation enters into force for credit transfers (CTs) and 24 months for direct debits (DDs) – though a single date might still be a possible outcome and would arguably make more practical sense. Other uncertainties at this point include whether the text will be sufficiently clear about the need to close existing national retail payment schemes and fully migrate to the European Payments Council’s (EPC’s) SEPA CT and SEPA DD schemes – which is what would be needed to ensure that the efficiency benefits of harmonisation and integration can be fully realised by corporates and other users.

Whilst the abolishment of Central Bank Balance of Payments Reporting for euro has not been considered by the EU legislator, the payments industry is strongly advocating for removal of these obligations in line with SEPA migration in order to allow for straight through pan-European payments processing.

Finally, there is a question as to whether corporates may be required to use ISO 20022 XML standards and formats when initiating files of payment instructions. Were this requirement to remain, it would represent an unexpected and significant additional migration cost to the corporate community – so lobbying is underway to explain that this is an unnecessary measure as corporates will be able to take advantage of the benefits without needing to invest in these standards themselves.

On the assumption that all of these issues will be resolved and planning certainty will be provided during 2011, a set of practical questions concerning what else needs to be done in preparation for a successful migration will need to be addressed by the corporate community.

One of the main benefits of SEPA for corporates is to gain significant efficiencies by allowing the centralisation of euro receivables and payables processing. This will enable streamlined liquidity management structures to be in place, improve account funding processes – and ultimately the rationalisation of bank accounts should also become a viable option in a harmonised euro market. Hence SEPA is a key puzzle piece of the overall shared service strategy of a corporate and a fully harmonised SEPA implementation should therefore be sought after by corporates to realise those benefits.

To ensure success of the SEPA project corporates will need to have a very close dialogue with their banks and potentially their ERP providers to ensure that preparations are in place and aligned at a technical level. This includes the requirement to ensure that all account data bases are IBAN compliant, given that IBAN and BIC are the account identifiers for SEPA.

Communication with a corporate’s own customer base will also be important, particularly if the corporate is a direct debit originator and looking to re-use existing mandates under the SEPA Direct Debits Core (consumer to business) scheme. “Whilst end dates will be available, some countries such as Finland have decided to move to SEPA credit transfers at a faster pace (by November 2011), which effectively requires customers to be connected to SEPA already this year. Against that background it is overall recommended to plan for pan-European SEPA implementation (in line with country presence) rather than piecemeal one-by-one moves.

In summary, now that we finally have – or at least are close to – certainty that SEPA migration is happening for real, the key for success, as with other large projects, will be in the quality of the planning and execution".

Next month’s question

“What issues should corporates take into consideration when setting up an in-house bank?”

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