At the 11th hour, the SEPA clock stopped ticking – well, for six months anyway. The deadline for the full switchover from legacy payment systems to the new single Euro payment area protocols for eurozone credit transfers and direct debits was to have been 1 February 2014. Yesterday, the European Commission threw in the towel – but it wants it back on 1 August.
Despite the efforts made by many banks and their corporate clients, the rate of take-up has not proved to be quick enough. As of last November, the rate of migration was just 64.1% for SEPA credit transfers (SCTs) and a lowly 26% for SEPA direct debits (SDD).
The EC now admits that, despite its efforts to raise awareness, it is “very unlikely” that full migration to SEPA will have happened by 1 February.
Potentially severe consequences
But because the deadline is a legal requirement, the EC said it is likely that banks would refuse to handle non-SEPA-compliant payment instructions. This, the EC said, would have “potentially severe consequences for citizens and companies”.
Now, the EC proposes amending the SEPA rules with a so-called “grandfathering clause” allowing banks (and other payment service providers) to handle legacy payments alongside SEPA-compliant payments for a limited six-month extension period to 1 August. It emphasised that this is “an exceptional one-off measure”.
The ECB “takes note”
In a seemingly stony-faced response, the Eurosystem of the European Central Bank said it “takes note” of the proposal, adding, “Strong and successful migration efforts have been carried out by stakeholders in the euro area… the pace of migration is high and accelerating, and the vast majority of stakeholders will complete their migration on time.”
As far as the ECB is concerned, “the SEPA migration end date of 1 February 2014 remains”. Eurosystem “urges all market participants to complete the transition of all credit transfer and direct debit transactions to the SEPA standards by this date.”
And as if to prove the point about punctuality, the ECB’s SEPA web page still has a countdown clock ticking the days, hours, minutes and seconds until 1 February.
The Eurosystem SEPA web page with links to the EC proposal and Eurosystem's response can be found here.