Treasury Today Country Profiles in association with Citi
Treasury Today July/August 2007 magazine cover Buy print copy button

July/August 2007

Previous editions


The SEPA debate continues

Bob Lyddon of IBOS Association writes:

Good exchange of views in the June magazine! IBOS’ working definition is that only 2% of payments (ie credit transfers) in the EU result in movement of money across borders. There is no cross-border Direct Debit scheme at present of course, so cross-border payments represent an even smaller proportion than 2% of EU non-card business.

IBOS only sees the market getting to approx 40% SEPA’isation by 2010 at best, due to the issues Treasury Today outlined. That does not mean it has no market impact at all. However, to SEPA’ise the rest may take many years – or may not occur at all unless the SEPA schemes become harmonised at a high level of functionality: they are too basic at present as regards accounting codes and reconciliation data, and their mismatch to legacy schemes. Nor is it a solution for each country to build its own AOS so as to match its legacy, that perpetuates compartmentalisation.

As well as this, the migration to IBAN+BIC represents a bigger hurdle than has been acknowledged. There has been an incentive for usage of IBAN+BIC on cross-border payments since July 2003 (go-live date of Reg 2560) and so far, they are included with approx 65% of cross-border credit transfers, but not at all on domestic transfers. So the penetration of IBAN+BIC is now 1.3% of EU credit transfers, and 0% of EU direct debits, and it needs to become 100% of both.

Meanwhile the EPC, the European Payments Council which represents the banks, has issued an interesting factsheet entitled ‘SEPA for public administrations – Creating critical mass for the Single Euro Payments Area’. It states that ‘now is the time for the public sector and its bodies and agencies especially those in the euro area, to make concrete preparations. This, of course, will involve initial investments in systems and processes. In so doing, the public sector will provide a major impetus towards the achievement of SEPA’s objectives.’

This factsheet is a very public admission of the importance of the public sector payments which are being happily handled on domestic payment systems. The factsheet goes on to say ‘given the very large number of payments generated by and towards the public sector, public administrations will act as a major catalyst in moving payments into SEPA’ and ‘the new SEPA payment instruments require critical mass to deliver the promised efficiency and cost gains.’

‘Public administrations will benefit considerably from the use of the new SEPA services, which will permit simplification, rationalisation, the potential for cost cutting and greater efficiency. Through early adoption, they will not be left behind as legacy payment systems are retired.’

The paper describes at great length the benefits of SEPA payments and SEPA payment systems and then proposes a set of next steps for public administrators:

  • Create a centre of excellence to draw together information about SEPA and current payment activities.

  • Engage with the SEPA planning and implementation projects at national level in close collaboration with central banks, banking communities and other stakeholders.

  • Make – in conjunction with banking partners – an assessment of the practical steps needed to adopt the SEPA payment instruments together with their associated benefits and efficiencies.

  • Establish a budget and mobilise a SEPA project organisation with identified early adopter priorities under the leadership of an accountable senior executive.

  • Educate both internally and externally among stakeholders the critical importance of SEPA and the required supporting information.

  • Ensure that all financial institutions within the public sector have concrete plans to become SEPA compliant.

  • Make an inventory of the SEPA planning of all related public sector enterprises and agencies.

It remains to be seen if and how pubic administrations rise to this challenge. The worry is that few will commit budget to such a project, seeing it as fixing something that is not broken. So if the carrot is not big enough, will the EPC ask the EU to start using a big stick and force closure of domestic systems?

The full paper is available at: