The European Central Bank opinion on the proposed directive on payment services in the internal market

The European Central Bank (ECB) has adopted its opinion, as requested by the Council of the European Union, on the proposed directive on payment services in the internal market.

The proposed directive is a very welcome initiative, as it establishes a comprehensive legal framework for payment services in the EU. Currently, there is a wide variety of national legislation related to payments, which makes the implementation of the Single Euro Payment Area (SEPA) problematic. Harmonisation of legal requirements for payments is therefore a vital measure that will assist the banking industry in its efforts to establish the SEPA.

Despite this generally positive assessment, the ECB opinion identifies some aspects of the proposed directive which should be adapted to preserve the smooth functioning of the payment system infrastructure. In particular, the ECB has a number of concerns regarding the scope of the activities of ‘payment institutions’, a new concept established by the proposed directive. In this respect, the proposed directive is insufficiently clear as to: (i) what kind of activities payment institutions are allowed to perform, and (ii) whether they are allowed to hold balances with similar economic characteristics to deposits or e-money and grant credit financed by money received from the public. These ambiguities leave the proposed directive open to diverging interpretations. In this respect, there should be adequate safeguards against the risks incurred and posed by payment institutions. If payment institutions are allowed to hold balances which in both economic and legal terms qualify as deposits, the level of safeguards should be the same as that applied to credit and/or e-money institutions.

If the Council and the European Parliament introduce this new category of payment institutions, the proposed directive should be amended to make it explicitly clear that payment institutions may not use customers’ funds during the limited time period that the funds are being transferred from the payer to the payee. This could be achieved by restricting the activities allowed for payment institutions and by introducing adequate safeguards.

Should adoption of the proposed directive be delayed, the introduction of SEPA-compliant schemes on 1 January 2008 and full migration to SEPA instruments by 2010 could be put at risk. If negotiations are prolonged, the option of splitting the directive should then be considered, giving priority to adopting the parts necessary for a successful implementation of the SEPA.

The ECB opinion will be published shortly in the Official Journal of the European Union and is also available on the ECB's website in all the official Community languages.