Ever since the creation of the European Economic Community in 1958, the movement towards an integrated financial market was marked by several major events. The most important was the issue of the euro in 1999, which led to the introduction of the TARGET payment system, the backbone of the euro financial system, which discounts all the payments made in the euro currency, both national and international, including the payments made through associated systems.
The implementation of the Single Euro Payments Area (SEPA) was the next step taken towards the expansion of the European integration process in the field of small payments made in the euro currency, by creating a single European market for euro payment instruments. SEPA is implemented by the European banking sector under the guidance of the European Payments Council and is supported and promoted by the European Central Bank and the European Commission.
SEPA represents the area where citizens, companies and other economic agents can make and receive payments in euro, within or beyond national borders, under the same basic terms, rights and obligations. Practically, these payments are handled as national payments, even though they are made across country borders. SEPA covers a geographical area which includes the 27 EU member states, Iceland, Liechtenstein, Norway and Switzerland.
This system is designed to ensure a proper level of efficiency and competitiveness that can stimulate economies and provide the European economy with a high level of competitiveness.
SEPA is developed through the adoption of a single set of payment instruments in the euro currency (credit transfer, direct debit and credit card payments), the implementation of efficient payment processing infrastructures, the adoption of joint technical standards and commercial practices, the constant development of new customer-oriented services and the creation of a common legal framework for payment services (including the transposition of new directives on domestic payments in the national legislation).
Advantages provided through SEPA
The SEPA project has a major impact on all parties involved, creating both opportunities and challenges. Increasing the possibility of choosing service suppliers, together with the economies of scale, will provide customers with a wide range of competitive solutions in terms of transactions.
For the companies (corporations, small companies, SMEs), the implementation of the SEPA system will facilitate payment management. Thus, companies will be able to make all their financial operations from a single bank account, using the SEPA payment instruments. Payment processing will be simplified, as well as all the entry and exit payments, using the same format. By consolidating the management of all payments and liquidities from a single location, the companies that develop business in the euro area will reduce costs and become more time-effective. The added-value services, such as on-line billing and reconciliation, will help companies constantly optimize the management of their operations. At present, these services are provided only on a national scale because the various forms of payment are difficult to be achieved outside country borders. Using the SEPA standardized payment plans companies will surpass these obstacles in an easier and more practical manner. Directive 2007/64/EC on payment services aims at guaranteeing a fair and open access on the payment service markets. This ensures the fact that all electronic payments in euro or in the local currency are made in as much as one day after the introduction of the payment order and provides the legal basis for the cross-border direct debit systems, thus reducing costs and increasing the number of options for customers.
Infringement for six EU member states
As for the implementation of the SEPA system, most EU member states managed to transpose the European legislation in the national legislation. However, six member states haven’t managed to properly implement the European directives in their national legislation. As a consequence, in June 2010, the European Commission issued an infringement procedure against these six countries: Cyprus, Greece, Poland, Romania, Spain and Sweden.
“While most EU member states have completely transposed Directive 2007/64/EC in their national legislations, six countries haven’t completed this process”, shows a communication from the EC. The European authorities will issue reasoned opinions to demand the complete implementation of the Directive, seeing as “three of the six countries still need to adopt the additional legislation necessary to transpose a series of dispositions stipulating the basic requirements for the payment institutions (Romania), the requirements related to information (Spain) and the requirements related to money laundry (Cyprus). As for Greece, Sweden and Poland, all the dispositions of the Directive have to be implemented”. The deadline for the finalization of the transposition process was November 2009. In case one of the member states will not act accordingly following the issue of the reasoned opinions, EC will present the case to the European Court of Justice.
by Pamela Luică
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