One of the basic elements needed for the success of SEPA is a common legal basis. This ensures that SEPA payments and related services are subject to a harmonised legal framework, irrespective of the countries involved in the transaction.
Regulations are the most direct form of EU law: they have immediate, binding legal force throughout every Member State, on a par with national laws. National governments do not have to take action themselves to implement EU regulations.
Directives are addressed to Member States, who must take action to make them part of national law.
In December 2010 the European Commission published a proposal for a regulation establishing EU-wide requirements for credit transfers and direct debits in euro. The final regulation came into effect on 31 March 2012 after its adoption by the EU Council and the European Parliament in February 2012.
“Regulation (EU) No 260/2012 of the European Parliament and of the Council establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009”
Regulation No 260/2012 sets 1 February 2014 as the deadline in the euro area for replacing national credit transfers and direct debits with their SEPA equivalents. In Member States with other currencies, the deadline is 31 October 2016. The regulation also requires the use of certain common standards and technical requirements, such as the use of International Bank Account Numbers (IBAN) and the financial services messaging standard ISO 20022 XML for all credit transfers and direct debits in euro in the EU.
On 9 January 2014 the European Commission published a proposal for a Regulation amending Regulation No 260/2012, proposing an additional transition period of six months for the euro area. The ECB published a press statement and an opinion on the proposal.
On 26 February 2014 Regulation (EU) No 248/2014 of the European Parliament and of the Council amending Regulation (EU) No 260/2012 concerning the migration to Union-wide credit transfers and direct debits was officially adopted.
Regulation No 260/2012 amends and replaces some provisions of Regulation No 924/2009 on cross-border payments in the Community. It ensures that the equal charging principle for cross-border and national payments in euro applies to all transactions, irrespective of the payment amount. It also defines deadlines by which multilateral interchange fees (MIFs) between PSPs for direct debit transactions have to be phased out (1 February 2017 for national direct debits, 1 November 2012 for cross-border direct debits).
Regulation No 924/2009 eliminates the differences in charges for cross-border and national payments in euro. It applies to payments in euro, in all EU Member States. The basic principle is that the charges for payment transactions in euro offered by a payment service provider (e.g. a bank) have to be the same whether the payment is a national or cross-border payment.
“Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001”
The regulation applies to all electronically processed payments, including credit transfers, direct debits, cash withdrawals at cash dispensers (ATMs), payments by means of debit and credit cards, and money remittance.
All non-euro area Member States have the possibility to apply this regulation to their national currency (currently Sweden and Romania).
Regulation No 924/2009 replaced the previous Regulation No 2560/2001 as of November 2009.
The Payment Services Directive (PSD) was established by the European Parliament and the EU Council in November 2007. The period granted to EU Member States to transpose the PSD into national law ended on 1 November 2009. On 24 July 2013 the European Commission published a proposal for a revised Payment Services Directive (PSD2).
“Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC”
The PSD provides a harmonised legal framework for payments in the European Union, which is necessary for the smooth functioning of SEPA. The PSD is not restricted to euro transactions, but applies to all payment services in all EU currencies within the European Union, at both the cross-border and national levels.
The PSD harmonises the market access requirements for non-bank payment service providers. This creates a level playing field with enhanced competition, which will help to foster innovation.
The PSD obliges payment service providers to process payments within certain time limits. The execution time “D+1” has applied since 1 January 2012.
D+1: payments executed from one business day to the next after the “point in time of receipt” of a payment order by the payer’s payment service provider, the amount of the transaction must be credited to the payee's payment account by the end of the next business day at the latest. This period may be extended by a further business day for paper-initiated payments. The amount of the payment transaction must be at the payee's disposal immediately after that amount is credited to the payee's payment service provider's account.
The “point in time of receipt” is the time when the payment order (transmitted directly by the payer or indirectly by or through a payee) is received by the payer's payment service provider. If the point in time of receipt is not on a business day for the payer's payment service provider, the payment order is deemed to have been received on the following business day. The payment service provider may establish a cut-off time near the end of a business day beyond which any payment order received is deemed to have been received on the following business day.
The PSD provides a clear and concise set of harmonised information requirements. These must be fulfilled by all service providers, regardless of whether they offer SEPA products or national payment products. This will improve transparency for customers.
The PSD provides clarity and certainty with regard to the core rights and obligations of both users and providers of payment services.
In July 2013 the European Commission published a proposal for a revised Payment Services Directive (PSD - Directive 2007/64/EC), otherwise known as the PSD2. The proposal is to extend the PSD so that it also covers third-party providers of payment services, such as payment initiation services offered in the context of e-commerce. The information requirements have been extended to also cover all currencies and transactions for which only one of the payment service providers is located within the EU. Further proposed changes aim to further strengthen consumer protection in the context of payments.
In addition, in July 2013, the European Commission published a proposal for a regulation on interchange fees for card-based payment transactions. The proposal applies to card transactions for which both payment service providers are established within the EU. It envisages introducing a cap on interchange fees as well as removing a number of business rules that currently restrict pan-European issuing, acquiring and processing in the cards’ market.
Directive 2014/92/EU relating to on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features.
The Directive will provide EU citizens with a right to a basic payment account irrespective of their place of residence or financial situation. The Directive will also improve the transparency of bank account fees and make it easier to switch a bank account from one bank to another.
Regulation (EU) 2015/847 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 lays down rules for payment service providers to send information on the payer throughout the payment chain.
Common technical standards are needed for processing SEPA payments. They are necessary to allow interaction and interoperability between IT systems and to ensure an automated processing of euro-denominated transactions between payment service providers (PSPs). This is referred to as “straight-through processing”, which means that no manual intervention is needed.
Regulation No 260/2012 requires the use of certain common standards and technical requirements, such as the use of International Bank Account Numbers (IBAN), Business Identifier Codes (BIC)and the financial services messaging standard ISO 20022 XML for all credit transfers and direct debits in euro in the EU.
Data elements that the payer needs to provide to the PSP:
Data elements that the payer’s PSP needs to provide to the payee’s PSP:
Data elements that the payee’s PSP needs to make available to the payee:
Data elements that the payee needs to provide to the payee’s PSP:
Data elements that the payee’s PSP needs to provide to the payer’s PSP:
Data elements that the payer’s PSP needs to provide to the payer:
According to the European Payments Council (EPC), a Single Euro Payments Area for cards will be achieved to the greatest extent possible through the use of open and free standards, available to all parties along the cards payment value chain. In cooperation with other stakeholders, the EPC is carrying out a card standardisation programme designed to remove any technical obstacles preventing a consistent customer experience throughout the SEPA cards market.
The SEPA Cards Standardisation Volume - Book of Requirements, developed by the EPC, defines the functional and security requirements, including requirements for the evaluation and certification methodology and architecture, that are recommended by the EPC for adoption throughout the card payment value chain to ensure interoperability within SEPA.
The creation of a genuinely integrated European cards market is heavily dependent on the implementation of harmonised functional standards. The Eurosystem – in its catalyst role – facilitates a continuous dialogue between market participants. In this context, a first Forum on functional SEPA Cards Standardisation was successfully held in March 2011, followed by a second Forum in February 2013 to discuss achievements and the way ahead for the cards functional standardisation domain.