On 28th March, the EU
Commission put forward a Proposal for a Regulation that will reduce charges for bank transfers in the European
Union outside the euro area. This initiative is aiming at making the banking
union ever closer, especially in retail banking where there have been fewer
actions compared to prudential regulation.
Thanks to Regulation 924/2009 fees for cross-border payments in euros between euro area members have been
equalised. However, the situation in non- euro zone EU countries is very
different with consumers often paying expensive fees even for the transfer of
small amounts of money. As mentioned in the press release for the Proposal, consumers in some instances were called to pay as much as 24 euro charges for
the transfer of 10 euros, making it highly detrimental to consumers.
The proposed Regulation amends Regulation
924/2009 and aims at removing this perceived barrier to the single market by
extending its scope to non-euro area Member States. It must be noted that the
proposed regulation only covers transactions in euros and not in other
currencies. Regulation 924/2009 offered the possibility to extend the
regulation to other currencies, yet only Sweden has made used of that rule. Therefore,
the Commission decided this was the time to introduce this measure as now euro payments are
cheaper than they were in the past.
The effect of the Proposal is
two-fold, as it harmonises cross-border banking charges as well as improving
transparency. According to the Proposal charges for cross-border payments in
euros will be the same as charges for national (non-euro) payments. This means
that the transfer fees will be significantly lower if not nonexistent. Consumer
will not be the only ones to benefit, as also businesses will be able to be
more competitive to businesses operating in the euro area.
As for transparency, at present
consumers are not able to compare options, especially when paying with a card
where they are offered the option to pay either in the local currency or in
their home currency. The Proposal tackles this issue by obliging payment
service providers to offer the full cost of both options to consumers prior to
the initiation of a payment transaction. Furthermore, recognising the constant
technological advances in the field, the European Banking Authority (EBA) will
develop regulatory technical standards on how payment service providers are to
fulfill their transparency obligations as well as being able to place caps on
such conversion charges.
The Proposal has been positively
received by consumer organisations, as reported in a euractiv article .Indeed this is a positive development for EU consumers and should it be
voted in the Parliament as it will have a tangible effect on their everyday
transactions making them easier and cheaper and making the banking union ever
closer.
