Treasury Today March 2015

Published: Mar 2015



On a SEPArate note

In recent weeks, regulatory talk has understandably turned to the European Parliament’s proposed money market reforms. And with ongoing concerns around the knock-on effect of Basel III, bank ring-fencing measures in the UK, and the US’s Foreign Account Tax Compliance Act (FATCA), for example, it is little surprise that the Single Euro Payments Area (SEPA) has fallen under the radar of late. Yet the next SEPA deadline is now less than 12 months away and some corporates have much to achieve in that time.

As treasurers will remember, the main phase of the migration in the euro area was completed on 1st August 2014, after the European authorities agreed to a six month ‘grace period’. But what some treasurers may have overlooked is the fact that there are compliance requirements mandated by the SEPA Regulation applicable as of 1st February 2016 as well.

Top of the list here is that, on that date, the ability for payment service providers (PSPs) to offer conversion of legacy in-country payments and/or direct debit formats into a SEPA-compliant ISO 20022 XML format will expire. As such, corporates and public entities in the euro area will have to send XML formatted files to their bank(s) from the beginning of February 2016, in line with the provisions of the SEPA Regulation.

The ‘IBAN only’ rule also comes into effect as of that date, meaning that statement of the Bank Identifier Code (BIC) for cross-border SEPA payments (and national payments in the countries where an extension was granted) will no longer be necessary – only the IBAN will be required. On a related note, PSPs will no longer be able to provide consumers with Basic Bank Account Number (BBAN) to International Bank Account Number (IBAN) conversion services for national payment transactions from that date either.

Elsewhere, the European Payments Council’s website states that niche products (credit transfer and direct debit instruments with a cumulative market share of less than 10% in any given EU Member State) which have previously been granted an exemption must also be SEPA-compliant as of the 1st February 2016.

So, for those corporates in the euro area, the message here is that SEPA migration is not yet over. And, as with all regulatory requirements, expert advice should be sought sooner rather than later around the true impact of this deadline on your company’s treasury function.

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