Classifying typical EU governance on the organizing principle of political relations is rather easy. Given that the EU emerged from multilateral treaties and that single states still have veto rights on many issues, EU governance is strongly based on consociation. On the constitutive logic, things are not as clear cut. Given the idealistic values that its very existence reflects, one might expect an active common good style. This was certainly true in the starting phase of the union, when the memory of WWII was a main driver for integration. However, with time, this changed. Political actions in the area of agrarian and regional subsidies, environmental issues and many others were more often than not initiated by conflicting interests of either nation members or other political actors such as firms, interest groups or even individuals. Well-known examples are subsidies to farmers that remain high to protect the farmers’ interests even though it might be better for the common good to lower or abolish them or the fact that only those countries joined the Euro that hoped to get a national advantage out of it. Thus, the normal mode of governing in the EU in the last decades was network governance (see also Skogstad, G., 2003).
Regulation 2560/2001 however marks a departure from this usual practice. First of all, it was not mainly initiated because of strong pressure of bank clients. Even stronger, those that filed complaints were larger companies and their needs were not even satisfied as the regulation does not apply for larger payments. Rather, the EU commission actively defined high transfer prices as detrimental to their goal of a common market (see the regulation, Article 1(1) in Appendix A) and as a hassle to its citizens. A reason for such a change in attitude might be that the common market is at the very heart of EU competencies and thus protecting it is crucial to the commission. It might also be signal to a beginning change in the self-definition of the EU. As the draft of a constitution also shows, the EU is moving from a confederal organization towards an almost stat-like entity. Thus, increasing common good policies might reflect an increased self-confidence. Furthermore, the regulation was accused by some banks as being pushed through against their resistance by majority rule (VÖB, 2001). Whether this is true however is highly questionably given that the EU had started to be interested in this issue as early as 1993 (Appendix A, Article 1), and had still asked banks to reconsider their pricing strategy just before drafting the regulation in the beginning of 2001 (Credit Control, 2001). Hence, the regulation in question was an example of either corporatism (as perceived by the commission) or even statism (as perceived by some banks). It thus is very possible that a new and changing way of governance might have contributed to a perception of arbitrariness on the side of the banks. This change might also reflect a new and strengthening self-confidence of European governance that starts to move away from its individual interest serving roots of an interstate organization towards a more idealistic common good seeking supranational state-like organization.
Technical aspects
With the introduction of the euro in 1999, the European Central Bank needed a real-time gross settlement system (RTGS) to accommodate international money transfers. To this end, the Trans-European Automated Real-time Gross settlement Express Transfer (TARGET) system was designed. The three goals of TARGET are ‘first (…), to facilitate the integration of the euro money market in order to allow for the smooth implementation of the of the single monetary policy; second, to improve the soundness and efficiency of payments in euros; and third, to provide a safe and reliable mechanism for the settlement of payments on a RTGS basis (…).’ (Committee on Payment and Settlement Systems, 2003). TARGET links the RTGS-systems of the fifteen (‘old’) EU member states. International transactions are submitted to the National Central Bank (NCB) of the originating country and are converted – if necessary – into a format that is comprehensible for TARGET. Through TARGET, the payment is then sent to the NCB of the destination country. If necessary, this NCB converts the payment message into the format of its country, so that the receiving local bank can perform the last step in the process. The process is illustrated in figure 1. The amount of transactions that are handled by TARGET is huge. Table 3 summarizes some data on the volume and value of transactions processed by TARGET.
Table 3: Volume of transfers through TARGET. Adapted from Commission on Payment and Settlement Sysstems (2003).
TARGET has neither upper nor lower limits on the value of its payments; any amount can be processed by the system. However, it is cannot be efficiently used to process low value payments such as meant in Regulation 2560/2001. The cross-border transfers handled by TARGET are mainly interbank payments with an average value of 17.7 million euros (Committee on Payment and Settlement Systems, 2003,, p.90).
The Regulation provided banks with an incentive to set up an efficient international system for processing international cross-border money transfers, so that costs for these transfers could be reduced. Several initiatives were launched or upgraded. The information about the different systems discussed here is taken from the Red Book of the Committee on Payment and Settlement Systems (2003).
The cooperative banks use TIPANET (Transferts Interbancaires de Paiement Automatisés). This system is managed by the TIPA Group S.C., that has been set up by cooperative banks in 1993 in six countries, including Canada. Nowadays, eleven cooperative banks from eight countries are member banks of TIPANET. However, there are also other banks using the TIPANET standard: there is for instance a network of 25 cooperative banks in Germany that use the TIPANET standard. TIPANET can only be used for low-value payments. In TIPANET, each bank is free to decide with which bank to do business in another country. Transfers are settled through reciprocal accounts that banks hold for each other. This means that a greater number of partners increases complexity for a bank. Costs also differ with each transaction partner. Unfortunately, no usage statistics are available for TIPANET.
As far back as 1989, postal and giro banks set up Eurogiro as a means to settle cross-border payments. In July 2002, Eurogiro had 39 members in 37 countries, including some commercial banks. Contrary to TARGET and TIPANET, all transactions are settled through one bank, Postgirot Bank of Sweden. Therefore, Eurogiro reaches a high degree of automation (‘straight through processing’). Although the larger part of transactions that Eurogiro handles are low-value, the system can also be used for large-value transactions. Table 4 shows some usage statistics for Eurogiro. The average transfer size sent through Eurogiro was € 2,375 in spring 2000.
Table 4: Volume of transfers through Eurogiro. Adapted from Commission on Payment and Settlement Sysstems (2003).
The third small settlement system is S-Interpay, set up in 1994 by the German savings banks (Sparkassen) and their central institutions (Landesbanken), but it has extended since and now also includes (mainly savings) banks in other countries. The layout of the system is similar to TARGET: in each country there are one or two banks that collects payment orders from the other banks in that country, comparable to the NCBs in TARGET. This correspondent banks transfers all orders to the correspondent bank in the recipient country. The receiving correspondent then takes care of the settlement. In this process, conversion of the orders to the messaging format of the receiving country may be necessary. If a currency other than euros is exchanged, banks use reciprocal accounts as in TIPANET to settle payments. The maximum value of a transfer is € 10,000 with S-Interpay, but this is planned to be increased to € 50,000 soon. Since processing is completely automated, a high degree of straight-through-processing is achieved. Unfortunately, there are no statistics on member banks and usage available.
Next to these somewhat older and small-scale systems, the European Banking Association (EBA) has set up STEP1 (November 2000) and – more recently – STEP2 (April 2003). Both systems use EURO1, a system of the EBA for large-value payments, for settling. In figure 2, the working of EURO1 is illustrated. EURO1 determines, based on a set of rules, the maximum amount that can be transferred between two banks. Then the system checks whether the execution of the payment order would lead to a too large credit or debit position. If not, EURO1 updates the accounts of both banks and the transaction is a fact. STEP1 and STEP2 work in a similar fashion, except that orders are batched and processed on a predetermined time. Furthermore, banks participating in STEP1 and STEP2 are not allowed to have debit position. Although there is no official limit on transfer size, usually size is below € 50,000. The main difference between STEP1 and STEP2 is that STEP2 provides
some additional features. STEP1 currently has 233 members and STEP2 has 67 members (). Table 5 presents usage statistics for STEP2; for STEP1, no usage statistics are available.
Table 5: Volume of transfers through STEP2. Adapted from http://www.abe.org/
Next to the abovementioned systems, some initiatives have been set up by institutions other than banks. Credit card company Visa launched a cross-border money transfer service, Visa Direct (The Economist, 2004), in July 2003. The idea behind this initiative is that the sender only has to know the recipient’s internationally recognised Visa account number or the recipient’s e-mail address (Thomas, 2002). This in contrast to the other systems, that require the International Bank Account Number (IBAN) and Bank Identifier Code (BIC) of the recipient to be included with the payment order. If not, Regulation 2560/2001 does not apply and banks can charge old prices again. The major drawback of Visa Direct is that it can only be used to send money to another Visa card holder ().
The question now arises whether these systems can coexist in the long term and if not, which system(s) will prevail. The next section will deal with this question, as well as explore the question what the optimal structure in the retail payment industry is.
Rivalry in the payment industry
The rivalry in the payment industry can be divided into two camps: small-scale (inter alia TIPANET, Eurogiro and S-Interpay) and large-scale (STEP1 and STEP2) networks. The small-scale camp argues that efficient handling of transactions is only possible if there are not too many banks in the network. Only then, it is possible to agree on standards as so reach a high level of straight through processing. Moreover, these networks are able to deliver more quality than a large-scale network. The large-scale camp argues that cost reductions in cross-border transfers can be achieved by reaping economies of scale. Furthermore, they think that standards are not so difficult to agree upon: the proof can be found in TARGET, STEP1 and STEP2 (European Central Bank, 2001).
The current situation can on the one hand be viewed as a competition for the market. This means that in the foreseeable future, a standard will be accepted by the industry. For one of the networks to become the standard, it has to reach a certain number of members (critical mass). As soon as this has happened, demand for alternative standards declines until they probably will not be economically viable anymore (Besanko, 2000). If this theory would hold true for the payment industry, then presumably STEP1 and STEP2 will set the standard and prevail (‘mind your BICs and IBANs’). On the other hand, it is also possible that competition in the market remains. This implies coexistence of the payment systems, so that each system must compete for its members.
In the payment industry, banks can cooperate and compete simultaneously, albeit on a different level. When setting standards (high level) they cooperate, whereas when they offer their customers a means of payment (low level) they compete (Kemppainen, 2003). It is difficult to determine the optimum between competition and cooperation. The current move towards cooperation in STEP1 and STEP2 has probably increased efficiency and reduced costs, because the large volume of transactions processed in these systems makes it possible to reap economies of scale. On the other hand, an agreed on standards leaves the banks little incentive for competition on the customer level.
Kemppainen (2003) identifies five market dynamics that can be applied to the payment industry. Tipping, excess momentum, path dependence, critical mass and underproductivity are all concepts that are to some extent applicable to the retail payment industry and foster a situation of cooperation in the market. By implementing Regulation 2560/2001 the EU tries to create a situation where a competition for the market arises. Apparently, the European Committee is of the opinion that the economies of scale that result from a common standard are more important than the decreased competition between the payment systems. Whether this results in an optimal situation is very hard to estimate; time will tell. The only thing that is certain is that customer prices of cross-border transfers have dropped significantly since Regulation 2560/2001.
Economic background
Giving a precise estimate of the impact of regulation 2560/2001 on the European economy is hard if not impossible. This is due to a number of reasons. First of all, there are still problems with the implementation and especially the enforcement of the regulation. Even though often prices for intra-European transfers have fallen dramatically, there are still cases where banks keep their old practices of double-charging and of taking high prices. However, the EU commission itself has no power to sanction such violations; this is left to national authorities (Bolkenstein, 2002). As a consequence, uncertainty of the customers and – more importantly – of the potential customers prevents a stronger use of European payment systems. Another factor making direct links to economic performance in Europe impossible is that the regulation happened in context with many other legislative and executive initiatives of the EU and national governments and with all different kinds of influences that are occurring simultaneously and that often have much stronger effects on the economy. Therefore, only indirect indicators of the importance of regulation 2560 /2001 can be given here.
One way to assess the relevance is to examine the importance of intra-European trade as this is a predecessor to intra-European payments. In figure 3, shows as an example the daily volume of international trade in Germany. The red line thereby represents trade with other EU countries. While this line reaches as high as €30 billion, the black line, indicating trade with non-EU countries stays well below €10 billion. Thus, trade within Europe is huge and growing and of course, it must be settled with payments. In Germany, for example one out of five citizens already has experience with payments abroad in the European area and half of those paid with bank transfer. For those two million people alone, regulation 2560/2001 would mean a decrease of prices from the absurdly high levels described above to an average of less than 10cts today (www.welt.de).
Nevertheless, the whole importance of this regulation can only be evaluated when seen in context with other measures to promote financial integration and the free flow of capital in Europe. Financial integration has long been a key point on the EU agenda for economic integration. (McKeen-Edwards, H., Porter, T., Roberge, I., 2004) umerous writers have acknowledged the link between financial integration and consumption, investment (Agénor, P.R., 2003) and eventually growth (Guisi, L., Japelli, T., Padula, M., Pagano, M. 2004). Agénor also names a few mechanisms that link financial integration and growth. Among those are: the benefits of international risk sharing for consumption smoothing, positive impact on investments, impetus for governments to maintain macroeconomic discipline, increased efficiency and stability (Agénor, pp.1092ff.). Some others however, (e.g. Edison, Levine, Rikki and Sløk, 2002) find no evidence linking financial integration to growth. Whatever the outcome of this discussion might be, undisputed remains the fact that free movement of capital is one important goal of the European Union (http://europa.eu.int) and efficient payments systems are one important ingredient of this (see Appendix A).
Conclusion
Since July 2002, the stepwise implementation of Regulation 2560/2001, that stipulates that charges for cross-border payments in euro should equal charges for domestic payments, has commenced. This paper has sought to clarify the reasons for the implementations and how the EU has gone about the implementation of the Regulation. Furthermore, it addressed the question what the consequences were for the banks and the economy as a whole.
The EU had two reasons to implement Regulation 2560/2001. The first reason for the Regulation was that prices for cross-border transfers were extraordinarily high and made up a significant portion of the transaction value, rendering it a serious cost factor. There were complaints about the prices not only from EU firms; US firms also complained.
Furthermore, there was intransparency of prices. Often, not only the sender, but also the beneficiary of the transfer was charged. This made it impossible for the sender to know if a sufficient amount had been transferred to the beneficiary. As the expected price drop in charges for cross-border transfers after the introduction of the euro did not occur, the European Commission decided to implement Regulation 2560/2001.
The banks, of course, have counterarguments against the Regulation. They argue that the low value and small amount of cross-border payments do not justify the high investment costs in sophisticated settlement systems that would lower costs. Secondly, they state that matters are complicated further by the different legal and technical frameworks that have been used in designing national systems. However, these arguments illustrate that there was no incentive for the banks to change the old situation. The only way cross-border payment charges could be lowered was through regulation.
The analysis of the implementation process in terms of the Kohler-Koch framework showed that this regulation had a history that is rather untypical form most regulations in the last years. Instead of arising from a conflict of interests that had to be settled, the issue was actively defined by the European Commission and brought into legislation. This might be a sign of the importance of the topic to the EU or of a renewed increased self-confidence. While some banks accused the Commission of having a statist attitude, this is probably more due to the individual perspective, since corporatism seemed to be the main driver behind this regulation.
TARGET is the settlement system set up by the ECB to accommodate for both large- and low-value cross-border transfers. However, TARGET is not optimally suited for low-value transfers. Several small-scale initiatives, such as TIPANET, Eurogiro and S-Interpay have been launched by the banks themselves. Furthermore, credit card company Visa has started a money transfer service. However, STEP1 and STEP2, developed by the EBA seem to be the most popular and efficient systems in use nowadays. These systems could be the best solution for the banks to handle the cost consequences of Regulation 2560/2001.
It is hard to tell which of these systems will prevail eventually. It is possible that these systems will compete together in the market or one system will become the standard, so that the current competition is for the market. This depends whether banks can agree on a standard. The popularity of STEP1 and STEP2 indicates that this could be the case. The five market dynamics of Kemppainen (2003) indicate that banks themselves tend to cooperate instead of compete. This is an additional reason for the European Commission to implement Regulation 2560/2001.
The direct consequences of Regulation 2560/2001 to the economy are unclear. However, intra-EU trade is three times higher than trade with other countries. Since intra-EU trade must be settled with payments, the impact of the Regulation could be large in stimulating trade. Furthermore, several authors have established a link between financial integration and growth, although others dispute this link. Irrespective of whether the Regulation fosters growth, it has certainly fostered the EU-ideal of free movement of capital.
To sum up, Regulation 2560/2001 has taken quite some effort to implement. The banks had to redesign their cross-border payment settlement systems. Also, the European Commission used an unusual mode of governance to enact the Regulation. Whether all this effort proves fruitful in the end remains to be seen: time and statistics on cross-border transfers will tell.
References
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Appendix A - The regulation in full text
REGULATION (EC) No 2560/2001 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 19 December2001 on cross-border payments in euro
Having regard to the Treaty establishing the EuropeanCommunity, and in particular Article 95(1) thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the Economic and Social Committee (2),
Having regard to the opinion of the European Central Bank (3),
Acting in accordance with the procedure laid down in Article251 of the Treaty (4),
Whereas:
(1) Directive 97/5/EC of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers (5) sought to improve cross-border credit transfer services and notably their efficiency. The aim was to enable in particular consumers and small and medium-sized enterprises to make credit transfers rapidly, reliably and cheaply from one part of the Community to another. Such credit transfers and crossborder payments in general are still extremely expensive compared to payments at national level. It emerges from the findings of a study undertaken by the Commission and released on 20 September 2001 that consumers are given insufficient or no information on the cost of transfers, and that the average cost of cross-border credit transfers has hardly changed since 1993 when a comparable study was carried out.
(2) The Commission's Communication to the European Parliament and the Council of 31 January 2000 on Retail Payments in the Internal Market, together with the European Parliament Resolutions of 26 October 2000 on the Commission Communication and of 4 July 2001 on means to assist economic actors in switching to the euro, and the reports of the European Central Bank of September 1999 and September 2000 on improving cross-border payment services have each underlined the urgent need for effective improvements in this field.
(3) The Commission's Communication to the European Parliament, the Council, the Economic and Social Committee, the Committee of the Regions and the European Central Bank of 3 April 2001 on the preparations for the introduction of euro notes and coins announced that the Commission would consider using all the instruments at its disposal and would take all the steps necessary to ensure that the costs of cross-border transactions were brought more closely into line with the costs of domestic transactions, thus making the concept of the euro zone as a ‘domestic payment area’ tangible and transparently clear to citizens.
(4) Compared with the objective that was reaffirmed when euro book money was introduced, namely to achieve an, if not uniform, at least similar charge structure for the euro, there have been no significant results in terms of reducing the cost of cross-border payments compared to internal payments.
(5) The volume of cross-border payments is growing steadily as completion of the internal market takes place. In this area without borders, payments have been further facilitated by the introduction of the euro.
(6) The fact that the level of charges for cross-border payments continues to remain higher than the level of charges for internal payments is hampering cross-border trade and therefore constitutes an obstacle to the proper functioning of the internal market. This is also likely to affect confidence in the euro. Therefore, in order to facilitate the functioning of the internal market, it is necessary to ensure that charges for cross-border payments in euro are the same as charges for payments made in euro within a Member State, which will also bolster confidence in the euro.
(7) For cross-border electronic payment transactions in euro, the principle of equal charges should apply, taking account of the adjustment periods and the institutions' extra workload relating to the transition to the euro, as from 1 July 2002. In order to allow the implementation of the necessary infrastructure and conditions, a transitional period for cross-border credit transfers should apply until 1 July 2003.
(8) At present, it is not advisable to apply the principle of uniform charges for paper cheques as by nature they cannot be processed as efficiently as the other means of payment, in particular electronic payments. However, the principle of transparent charges should also apply to cheques.
(1) OJ C 270 E, 25.9.2001, p. 270.
(2) Opinion delivered on 10 December 2001 (not yet published in the Official Journal).
(3) OJ C 308, 1.11.2001, p. 17.
(4) Opinion of the European Parliament of 15 November 2001 (not yet published in the Official Journal), Council Common Position of 7 December 2001 (OJ C 363, 19.12.2001, p. 1) and Decision of the European Parliament of 13 December 2001.
(5) OJ L 43, 14.2.1997, p. 25
(9) In order to allow a customer to assess the cost of a cross-border payment, it is necessary that he be informed of the charges applied and any modification to them. The same holds for the case that a currency other than the euro is involved in the cross-border euro payment transaction.
(10) This Regulation does not affect the possibility for institutions to offer an all-inclusive fee for different payment services, provided that this does not discriminate between cross-border and national payments.
(11) It is also important to provide for improvements to facilitate the execution of cross-border payments by payment institutions. In this respect, standardization should be promoted as regards, in particular, the use of the International Bank Account Number (IBAN) (1) and the Bank Identifier Code (BIC) (2) necessary for automated processing of cross-border credit transfers. The widest use of these codes is considered to be essential. In addition, other measures which entail extra costs should be removed in order to lower the charges to customers for cross-border payments.
(12) To lighten the burden on institutions that carry out cross-border payments, it is necessary to gradually remove the obligations concerning regular national declarations for the purposes of balance-of-payments statistics.
(13) In order to ensure that this Regulation is observed, the Member States should ensure that there are adequate and effective procedures for lodging complaints or appeals for settling any disputes between the originator and his institution or between the beneficiary and his institution, where applicable using existing procedures.
(14) It is desirable that not later than 1 July 2004 the Commission should present a report on the application
of this Regulation.
(15) Provision should be made for a procedure whereby this Regulation can also be applied to cross-border payments made in a currency of another Member State where that Member State so decides,
HAVE ADOPTED THIS REGULATION:
Article 1
Subject matter and scope
This Regulation lays down rules on cross-border payments in euro in order to ensure that charges for those payments are the same as those for payments in euro within a Member State. It shall apply to cross-border payments in euro up to EUR 50 000 within the Community. This Regulation shall not apply to cross-border payments made between institutions for their own account.
Article 2
Definitions
For the purposes of this Regulation, the following definitions shall apply:
(a) ‘cross-border payments’ means:
(i) ‘cross-border credit transfers’ being transactions carried out on the initiative of an originator via an institution or its branch in one Member State, with a view to making an amount of money available to a beneficiary at an institution or its branch in another Member State; the originator and the beneficiary may be one and the same person,
(ii) ‘cross-border electronic payment transactions’ being:
- the cross-border transfers of funds effected by means of an electronic payment instrument, other than those ordered and executed by institutions,
- cross-border cash withdrawals by means of an electronic payment instrument and the loading (and unloading) of an electronic money instrument at cash dispensing machines and automated teller machines at the premises of the issuer or an institution under contract to accept the payment instrument,
(iii) ‘cross-border cheques’ being those paper cheques defined in the Geneva Convention providing uniform laws for cheques of 19 March 1931 drawn on an institution located within the Community and used for cross-border transactions within the Community;
(b) ‘electronic payment instrument’ means a remote access payment instrument and electronic money instrument that enables its holder to effect one or more electronic payment transactions;
(c) ‘remote access payment instrument’ means an instrument enabling a holder to access funds held on his/her account at an institution, whereby payment may be made to a payee and normally requires a personal identification code and/or any other similar proof of identity. The remote access payment instrument includes in particular payment cards (whether credit, debit, deferred debit or charge cards) and cards having phone- and home-banking applications. This definition does not include cross-border credit transfers;
(d) ‘electronic money instrument’ means a reloadable payment instrument, whether a stored-value card or a computer memory, on which value units are stored electronically;
(e) ‘institution’ means any natural or legal person which, by way of business, executes cross-border payments;
(f) ‘charges levied’ means any charge levied by an institution and directly linked to a cross-border payment transaction in euro.
Article 3
Charges for cross-border electronic payment transactions and credit transfers
1. With effect from 1 July 2002, charges levied by an institution in respect of cross-border electronic payment transactions in euro up to EUR 12 500 shall be the same as the charges levied by the same institution in respect of corresponding payments in euro transacted within the Member State in which the establishment of that institution executing the cross-border electronic payment transaction is located.
2. With effect from 1 July 2003 at the latest, charges levied by an institution in respect of cross-border credit transfers in euro up to EUR 12 500 shall be the same as the charges levied by the same institution in respect of corresponding credit transfers in euro transacted within the Member State in which the establishment of that institution executing the cross-border transfer is located.
3. With effect from 1 January 2006 the amount EUR 12 500 shall be raised to EUR 50 000.
Article 4
Transparency of charges
1. An institution shall make available to its customers in a readily comprehensible form, in writing, including, where appropriate, in accordance with national rules, by electronic means, prior information on the charges levied for cross-border payments and for payments effected within the Member State in which its establishment is located. Member States may stipulate that a statement warning consumers of the charges relating to the cross-border use of cheques must appear on cheque books.
2. Any modification of the charges shall be communicated in the same way as indicated in paragraph 1 in advance of the date of application.
3. Where institutions levy charges for exchanging currencies into and from euro, institutions shall provide their customers with:
(a) prior information on all the exchange charges which they propose to apply; and
(b) specific information on the various exchange charges which have been applied.
Article 5
Measures for facilitating cross-border transfers
1. An institution shall, where applicable, communicate to each customer upon request his International Bank Account Number (IBAN) and that institution's Bank Identifier Code (BIC).
2. The customer shall, upon request, communicate to the institution carrying out the transfer the IBAN of the beneficiary and the BIC of the beneficiary's institution. If the customer does not communicate the above information, additional charges may be levied on him by the institution. In this case, the institution must provide customers with information on the additional charges in accordance with Article 4.
3. With effect from 1 July 2003, institutions shall indicate on statements of account of each customer, or in an annex thereto, his IBAN and the institution's BIC.
4. For all cross-border invoicing of goods and services in the Community, a supplier who accepts payment by transfer shall communicate his IBAN and the BIC of his institution to his customers.
Article 6
Obligations of the Member States
1. Member States shall remove with effect from 1 July 2002 at the latest any national reporting obligations for cross-border payments up to EUR 12 500 for balance-of-payment statistics.
2. Member States shall remove with effect from 1 July 2002 at the latest any national obligations as to the minimum information to be provided concerning the beneficiary which prevent automation of payment execution.
Article 7
Compliance with this Regulation
Compliance with this Regulation shall be guaranteed by effective, proportionate and deterrent sanctions.
Article 8
Review clause
Not later than 1 July 2004, the Commission shall submit to the European Parliament and to the Council a report on the application of this Regulation, in particular on:
- changes in cross-border payment system infrastructures,
- the advisability of improving consumer services by strengthening the conditions of competition in the provision of cross-border payment services,
- the impact of the application of this Regulation on charges levied for payments made within a Member State,
- the advisability of increasing the amount provided for in Article 6(1) to EUR 50 000 as from 1 January 2006, taking into account any consequences for undertakings.
This report shall be accompanied, where appropriate, by proposals for amendments.
Article 9
Entry into force
This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Communities. This Regulation shall also apply to cross-border payments made in the currency of another Member State when the latter notifies the Commission of its decision to extend the Regulation's application to its currency. The notification shall be published in the Official Journal by the Commission. The extension shall take effect 14 days after the said publication.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 19 December 2001.
For the European Parliament
The President
N. FONTAINE
For the Council
The President
A. NEYTS−UYTTEBROECK
Appendix B - Teamwork
The following division has been used in writing:
introduction -- Thorben
the case for the regulation -- Thorben
arguments against the regulation -- Bas
implementation in the context of general EU governance -- Thorben
technical aspects -- Bas
rivalry in the payment industry -- Bas
economic background -- Thorben
conclusion -- Bas
Appendix C - Statement on grading
All members participated equally in the work of the team and grading should be uniform.
Although Mr. Arnold subtly criticises Regulation 2560/2001, he ends his speech on a high note by indicating the measures taken by the banks to comply with the regulation and stating that the banks will be happy to take further steps towards integration in the future.
Cheques are considered are very inefficient means of payment and should be discouraged as much as possible according to the European Central Bank (The Economist, 2004).