26 April 2006

ECON Hearing on Payments

The EP’s ECON Committee held a public hearing on the New Legal Framework for Payments focusing on the protection of customers funds, capital requirements for payment institutions, and possible legislative steps. Banks and regulators insisted that they want new entrants to be subject of new capital requirements. Particularly banks are calling for a level playing field with regards to new market entrants.

Mr Fournier from the French Banking Commission underlined that minimum supervisory rules seem necessary and stated that “regarding technical features, it certainly makes sense that the supervisory framework would be adapted to the risks incurred, which could mean a ‘lighter’ supervisory regime than for banks which carry out many diversified activities.”

Mr Bryant, Secretary General of the European Payments Council warned that the harmonisation approach could lead to “Gold-Plating” and requires careful thought. He stressed that “it is essential that the proposed payment institutions are regulated on the basis of the level playing field principle” and favoured the establishment of a harmonized legislative framework for the regulation of non-bank providers of payment services.

Mr Murray from BEUC warned to low down consumer protection and stated that “minimum harmonisation should be the only option where a full harmonisation measure would reduce the level of protection in member state(s) or a full harmonisation measure would not be readily adaptable to changing market conditions.

Mr Stephenson, Head of International Relations of Cartes Bancaires on the other hand stated that “self-regulation is likely to prove to be more effective than adopting a Directive whose application and interpretation would prove difficult for payment cards, and would not lead to the desired full harmonisation”.

He criticized that the proposed Directive covers 3 completely different methods of payment, i.e. direct debit, credit transfers and cards, which “will prove to be a nightmare when applied to card transactions”. “The text is simply not adapted to cards”, Mr Stephenson added.

Ms Azevedo, Senior Vice President of Western Union noted that only one activity of her company is touched by the proposed directive, i.e. money transmission services. She supported “a regime that causes (all market participants) to become regulated and observant of the AML rules” to avoid the informal market to go further underground.

“Western Union are owned and operated by independent companies who join the Western Union network by contract. They include banks, post offices, bureau de changes, and, where permitted by local law, even grocery shops and travel agencies”, she explained the business concept.

With regard to capital requirements, Ms Azevedo explained that Western Union “holds the money for very little time - that is, a matter of minutes, or at most hours.” “Settlement of payments is actually done using regular banking systems - leaving them exposed to even less risk” she added.

“Given the velocity of payment transactions and the fact that most of the funds find their way into the banking system in any event, we believe that a heavy and inflexible protection scheme for consumer funds is unnecessary”, Ms Azevedo concluded

Statement Fournier, French Banking Commission
Statement Bryant, European Payments Council
Supplement
Statement Murray, BEUC
Supplement
Summary
Statement Stephenson, Cartes Bancaires
Statement Ms Azevedo, Senior Vice President of Western Union

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