Wednesday, January 17, 2007

Partial evaluation of regulation 2560 reveals true (better?) regulation agenda of European Commission

See this link that brings you to a Commission Staff Working Document addressed to the European Parliament and to the Council on the impact of Regulation (EC) No 2560/2001 on bank charges for national payments. It concludes that generally charges for cross-border payments decreased considerably as a result of Regulation 2560. Furthermore the Regulation provided an incentive for the payments industry to modernise its EU-wide payment infrastructure.

The conclusion also states:
Whilst being a first significant step towards the achievement of SEPA, Regulation 2560 was followed by other measures, which are currently under way. These mainly include a proposal for a Payment Services Directive, whose objective is to establish a harmonised set of rules applicable to the provision of payment services in the EU.

Furthermore, one of the aims of the Payment Service Directive, which is currently before the Council and European Parliament for adoption, is to introduce new competition into the payments market. This should help to keep prices down and will have a range of practical consequences on the functioning of Regulation 2560.

As explained above, the Commission will issue this full review and evaluation of Regulation 2560 by mid-2007. Any follow-up for future modification of Regulation 2560 would be determined by this review, and by the final text of the Payment Service Directive, as well as by the outcomes of the industry–led initiatives to create SEPA.

- the Commission will not revoke regulation 2560 (although its direct price regulation is opposite to the principle of cost-based fees, which help achieve the 50 billion euro benefits of the Payment Service Directive),
- the Commission may sometime in the far future revoke or alter it if banks sufficiently do their best in creating SEPA and lowering prices in the retail payments market.

Interestingly, a similar idea is not being fully applied to mobile operators but allows the mobile operators a cost plus- based fee for international calls/data services. So all animals are equal, but apparently the banking animal requires a more stringent approach when it comes to creating a European market.

Now, let's have a look at how the European Commission deals with the better regulation principles in the domain of payment services. The intentions are clear: McCreevy outlines this in a million of speeches:
Ladies and Gentleman, this Commission is taking a more variable, more modern approach to regulation. Strict adherence to better regulation principles. Wide consultation. Full impact assessments to ensure that initiatives are fully thought through. Legislation only where clear benefits are apparent.
Yet practice shows a consequent delay in the evaluation of regulation, a delay in preparing it and effectively only pays lipservice to the better regulation principles. The money is not where the mouth is, as we can see from the following actions.

1-start a huge SEPA incentives consultation in march 2006, to find out more about the future of the European Payments Market (and how to proceed towards it) and then shelve the initiative without explanation,
2-ignore the better regulation principles, more particularly in the minimum standard E on consultations (page 21 in this document), and do not publish the responses to the SEPA-incentives exercise on a website, even if the ECOFIN calls for publication without delay of those responses (see p. 21 of the ECOFIN-paper),
3-perform an evaluation and consultation on VAT-treatment for pre-paid vouchers that acknowledges the existence of e-money payments by mobile phones (0900 and SMS/MMS/I-mode etc),
4-ignore the above facts on m-payments during the evaluation of the e-money Directive (and its application to mobile operators) and assume that telephones are hardly ever used for making payments (be it pre-paid or postpaid) ;
5-shelve the discussion and issue of a level playing field for e-money players and mobile operators for a number of years (until when the Payment Service Directive is drafted and ready),
6-ignore the inconsistencies between existing regulation (2560) and planned regulation (PSD, revision of VAT-regimes, e-money, SEPA-incentives) and continue a fear tactic towards banks by not revoking a regulation which can be revoked as it has served its purpose.

Anyone still wondering why Europe and the European Constitution is in crisis?