Payments Market Framework
An EU directive aims to establish a framework for the creation of an integrated payments market. It covers payment service providers established in the EU. It covers payments in euro and other national currencies of the EU. It does not apply to cash or cheque payments.
The directive establishes a number of categories of payment service provider. These include
- Credit institutions, i.e., banks, et cetera
- Post office, giro institutions
- Electronic money institutions
Bodies must be authorised by the competent authorities in order to provide payment services. They must meet the minimum standards in respect of competence, controls, structural organisation and risk management.
Once established, a payment institution may provide services throughout the EU with the freedom to provide services cross-border and freedom to establish.
The payment institutions must be monitored by national authorities. They may issue recommendations, guidelines, and binding administrative provisions. They may withdraw authorisations and impose penalties.
The legislation provides for information on the payer to accompany the transfer of funds. It provides for rules to ensure traceability of funds transfers. It applies to all payment service providers.
It does not apply to fund transfers in the context of a commercial transaction carried out using a credit or debit card or other similar payment instruments as long as there is a unique identifier allowing the transaction to be traced to the payer which accompanies all transfers running from that commercial transaction and the beneficiary has entered into an agreement with the payment service provider enabling the payment. It does not apply to transfer of funds between service providers acting on their own behalf.
Payment service providers must ensure that the transfer of funds contains complete, accurate and meaningful information on the payer. An intermediary payment service provider must ensure that all information on the payer is transferred with it or retained in an appropriate manner.
A directive provides for information which must be communicated to customers in advance including information as to the right of the party, fees and complaint procedures. Certain other information must be supplied at the customer’s request prior to the execution of the transaction including on execution time, commissions, fees, and charges.
Certain information must be made available to the payer after the transaction including references, details of fees, exchange rates, commissions. Information must be available to the payee after funds have been received.
Rights and Obligations
The rights and obligations that the users and providers of payment services are provided including
- an execution time of one working day will be required after a transitional period
- liability of the service provider in the case of non or defective execution
- liability of the service provider in the case of fraudulent use of a payment instrument limited to €150 euro for personal customers
- the full amount of transfer to be credited to the beneficiary without deductions
- the conditions for refunding when a payment authorisation has been incorrectly authorised.
Euro payment transactions between member states or in a member state are regulated as to charges. This covers credit transfers, direct debits, withdrawals from ATMs, payments by debit and credit cards, and fund transfers. The EU regulation applies to payments less than €50,000. The regulation does not apply to currency conversion charges.
Service providers must provide identical charges for cross-border payments and electronically processed payment transactions where the payer’s payment service provider and the payee’s payment service provider are in different states or in relation to national payments where the two providers are in the same state.
Payment service providers must give each customer an IBAN (International Bank Account Number.) They must also communicate the bank identifier code (BIC.) A customer may be subject to additional charges if these are not provided. Such charges must be flagged.
Each state must designate an authority to ensure compliance with the regulation. If there is an infringement, claims may be submitted to the national authorities for out-of-court complaint and redress. There are penalties for infringements.
Payment service providers must report suspicious authorities to parties responsible for money laundering and terrorist finance legislation. Access to the information accompanying the payment may be given to the authorities only for the purpose of preventing, investigating or detecting terrorist financing or money-laundering.
The payee’s payment service provider must be in a position to detect where there is no information or insufficient information on the payer when receiving transfers. It must take steps to correct the position including refusal or requests for further information. The transfer must not remain anonymous.
The denominations and technical specifications of euro coins are laid down by European regulation. These technical characteristics apply to the weight, diameter, colour, et cetera.
The euro is independent of the European Union and member states. It is an institution of the EU.
The European system of central banks is made up of the European Central Bank and the national central banks including those outside the euro. The aim of the European system of central banks is to
- implement the monetary policy of the euro area
- conduct foreign exchange operations
- manage foreign exchange reserves of the countries at the euro area,
- promote smooth payment system.
There are regulations to ensure efficient and sound clearing and payment systems. There is provision for the cooperation of central banks and institutions of other countries
The Governing Council of the ECB consists of six members of the executive board and the central bank governors of the states that have adopted the euro. Each has one vote. They formulate the monetary policy of the euro area. It may set interest at which commercial banks can obtain money from the central bank thereby setting rates throughout the euro area.
The executive board of the ECB consists of the president and vice president and four others. They are appointed by the heads of government. It implements monetary policy as defined by the governing council and the general council. It comprises the president and vice president of the ECB and central bank governors of all EU stated. It has advisory and statistical functions.
The functions of the ECB include the issue banknotes and coins. It is the only body authorised to issue banknotes and coins. It has acquired functions to stabilise the financial system and monitor the banking sector.
EU legislation provides that the minimum reserves for credit institutions and branches throughout the euro area are the same. There are sanctions consulting fines and penalties, penalty interest for non-compliant institutions.
Institutions may be exempted for minimum reserves in accordance with non-discriminatory criteria. The ECB is entitled to verify compliance and impose sanctions.