Global Transaction Banking Deutsche Bank WICHTIGE HINWEISE ZUM ARBEITEN MIT PRÄSENTATIONEN BITTE...

Global Transaction BankingDeutsche Bank

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An Overview of SEPAOctober 2010


Top-10 in Google.com:

— Single Euro Payments Area

— Scottish Environment Protection Agency

— Solar Electric Power Association

— State Environmental Policy Act

— Science Education Partnership Award

— SouthEastern Psychological Association

18.04.23 12:20 nachm. 2010 DB Blue template

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Do you really know what SEPA is?


SEPA Background

SEPA Credit Transfer

SEPA Direct Debit

SEPA Status and Outlook

SEPA Benefits


— Domestic Credit-Transfer and Direct-Debit schemes vary considerably throughout Europe

— Example Direct Debit:— Different mandates

— Different submission dates

— Different cut-off times

— Different return timeframes (finality of payment) even post-PSD

— Interbank rules vs. local law

— Different file formats

— No cross-border direct debits

— Potentially forced to use different banks in different countries

— Cumbersome account reconciliation efforts


4

The European Payments Landscape pre SEPA (1)


— Domestic Credit-Transfer and Direct-Debit schemes vary considerably throughout Europe

— Example Direct Debit:


5

The European Payments Landscape pre SEPA (2)

Italy (RID)

- Due date

- Registration of creditor with Central Bank (SIA)

- Debtor bank needs the mandate (mandate check)

- CBI RID file format

Portugal (EDR) - No due date

- Creditor ID has to be registered with SIBS

- Debtor bank does not need the mandate (no mandate check)

- EDR file format

Belgium (DOM’80)- No due date

- Registration of creditor by DB with CEC/UVC, which assigns a unique creditor ID

- Debtor bank needs the mandate (mandate check)

- DOM’80 file format

Spain (CSB19)- No due date

- No registration of the creditor with central bank

- Debtor bank does not need the mandate (no mandate check)

- CSB19 file format


— 1999: Introduction of the Euro

— 2000: EC Financial Services Action Plan— Also known as “Lisbon Agenda”

— Comprising 42 measures to create a Single Financial Services Market

— 2002: Launch of SEPA initiative by the banking sector— European Payments Council (EPC)

— 2008: First step achieved: launch of the SEPA credit transfer

— 2009: Second step achieved: launch of the SEPA direct debit


6

Single Euro Payments Area (SEPA):A political Project


— Instruments and schemes — Credit Transfers (since 28 January 2008)

— Direct Debits (since 2 November 2009)

— Debit-Card transactions

— Phase out of national payment schemes (by 2012/13?)

— Market Infrastructure — From various local systems to pan-European clearing houses (PE-ACH’s)

— Legal Framework (European Commission)— European Payment Services Directive

— Transposition into national law completed in most countries

— EU Regulation 924/2009 (formerly 2560/2001)


7

Scope



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Geographic Scope

…only € Transactions!

EU – Euro Countries (16)Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia, Slovakia and Spain

EU – Non-Euro Countries (11)Bulgaria, Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Sweden, United Kingdom

The European Economic AreaIceland, Liechtenstein, Norway

and additionallySwitzerland, Monaco, Mayotte and St.Pierre-et-Miquelon


SEPA Background


SEPA Direct Debit


SEPA Benefits


— Full amount credited to beneficiary – no deductions

— Maximum clearing cycle from transaction initiation to credit on the beneficiary account of:— Currently max. 2 days

— Max. 1 day from 2012

— Central-bank reporting will continue— Threshold increased to EUR 50k from January 2010 (EU Reg. 924)

— Germany remains at EUR12,500

— Not covered by SEPA— Foreign-currency Payments (EU also)

— Urgent Payments


10

SEPA Credit Transfer Characteristics


— IBAN and BIC to replace account number and national bank code

— Payment Detail field length: 140 characters

— Optional fields for:— Originator reference (end-to-end reference)

— Purpose Codes

— The orderer bank must pass them on to the beneficiary bank

— The beneficiary bank can optionally display them to the beneficiary

— Category Purpose Codes

— The orderer and/or the beneficiary bank can optionally offer special processing

— E.g. bulk vs. individual booking

— For on-behalf-of payments

— Originator Reference Party

— Beneficiary Reference Party


11

SEPA Credit Transfer New Data Elements


SEPA Background


SEPA Direct Debit


SEPA Benefits


— Direct debit scheme based on a signed mandate— Content is standardised

— Language of debtor country

— Creditor captures and maintains mandate data

— Relevant mandate data are part of every SDD (creditor mandate flow)

— Harmonized collection and exception timelines and rules (so-called R-transactions)


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SEPA Direct DebitCharacteristics


— IBAN & BIC instead of legacy account number & national bank code

— Unique mandate number— To be issued by creditor

— Country-specific creditor ID— Issuance to be defined per country

— Example Germany: via central bank

— Mandate date— Likely a fictitious date for existing mandates

— Remittance Information (Payment Detail) field length: 140 characters


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SEPA Direct DebitNew Data Elements (1)


— Mark as B2B or Core SDD

— Mark as first or one-off direct debit, or as recurrent direct debit

— Optional creditor reference (end-to-end reference)

— Optional transaction codes— Purpose Codes

— The creditor bank must pass them on to the debtor bank— The debtor bank can optionally display them to the debtor

— Category Purpose Codes— The creditor and/or the debtor bank can optionally offer special processing— E.g. bulk vs. individual booking

— For on-behalf-of collections— Creditor Reference Party — Debtor Reference Party


15

SEPA Direct DebitNew Data Elements (2)


— Usage— Core SDD: can be used with consumers and companies

— B2B SDD: can be used with companies only

— Status of micro-enterprises to be determined by country

— A micro-enterprise is defined as an enterprise which has less than 10 employees and whose annual turnover or balance sheet is equal or less than 2 million Euro (2003/361/EC)

— Return right by debtor— Core SDD: 8 weeks after debit

— B2B SDD: no return right after debit


16

SEPA Direct Debit Core vs. B2B Scheme: Main Differences (1)


— Mandate check by debtor bank— Core SDD: optional

— B2B SDD: mandatory

— Usage considerations

— Acceptance of B2B scheme by debtor/debtor bank

— Implications on processes (especially if both schemes are used)


17

SEPA Direct Debit Core vs. B2B Scheme: Main Differences (2)



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SEPA Direct DebitTimelines

D: Due date = debtor’s debit date = inter-bank settlement date

D-14 CD: Customer pre-notification of amount & due date (unless other timeframe is agreed)

D-1 BD: Submission of first, one-off and subsequent SDD

D+2 BD: Latest date for bank returns

No refund right for debtor

D+36 M: Mandate expires 36 months after last SDD submission

CD = Calendar DaysBD = Business DaysW = WeeksM = Months* = optional reduction to D-1 in discussion

D: Due date = debtor’s debit date = inter-bank settlement date

D-14 CD: Customer pre-notification of amount & due date (unless other timeframe is agreed)

D-5 BD:* Submission of first & one-off SDD

D-2 BD:* Submission of subsequent SDD

D+5 BD: Latest date for bank returns

D+8 W: Maximum refund period for debtor for authorized transactions

D+13 M: Maximum refund period for debtor for unauthorized transactions

D+36 M: Mandate expires 36 months after last SDD submission

B2B Direct DebitCore Direct Debit



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SEPA Direct DebitMandate Sample Core Scheme

IBAN & BIC

Authorization of the debtor‘s bank in addition to the creditor

Mandate Number

Additional examples in “EPC Guidelines for the Appearance of Mandates” from 04.12.08:http://www.europeanpaymentscouncil.eu/knowledge_bank_list.cfm?documents_category=1

and at:http://www.europeanpaymentscouncil.eu/content_preview.cfm?page=the_sepa_direct_debit_mandate

Creditor ID



20

IBAN & BIC

Authorization of the debtor‘s bank in addition to the creditor

Mandate Number

Additional examples in “EPC Guidelines for the Appearance of Mandates” from 04.12.08:http://www.europeanpaymentscouncil.eu/knowledge_bank_list.cfm?documents_category=1

and at:http://www.europeanpaymentscouncil.eu/content_preview.cfm?page=the_sepa_direct_debit_mandate

Creditor ID

SEPA Direct DebitMandate Sample B2B Scheme

No refund right


SEPA Background


SEPA Direct Debit


SEPA Benefits



22

Strategic Benefits

Risk Control

Co

st

Re

du

cti

on

SEPA

SEPA

SEPA

SEPA

Trends Result: Increased Centralization

Reduction of banking partners/accounts

Seamless IT interfaces Elimination of paper

Rationalization

SWIFT for corporates XML formats SEPA

Standardization

Centralized Treasury SSC/Payment factories Single ERP Outsourcing

Centralization

Shared Service Centers

Centralization of liquidity regionally(In-house banks)

Payment factories/“on behalf of” payments

Collection factoriesvia SDD

Collections“on behalf of”

Local cash management by subs

Centralization of liquidity by country



23

Account Consolidation

SEPA TransactionsSEPA Countries

Clients need just one account in Europe for making payments and collections

Corporate



24

Limitation of Centralization with SEPA

Geographic / Currencies(only EUR)

Instruments(e.g. checks, Ribas,

letters of exchange, etc.)

Potentially legal and tax constraints

Corporates still need Banks able to Support them with Local Services throughout Europe

SEPA


SEPA Background


SEPA Direct Debit


SEPA Benefits


— 28 January 2008: SEPA Credit Transfer (SCT) went live— More than 4.400 banks have joined the scheme

— Broad reachability achieved (95% of payment volume)

— SCT Migration

— File conversion by some banks

— First clients with “real” XML files

— Public sector starts to move

— 2 November 2009: SEPA Direct Debit (SDD) went live— Some 3.000 banks have joined the scheme

— Only limited reachability achieved (70% of DD volume)

— SDD migration expected to start from November 2010


26

Current Status


— The SCT is not a mass payment instrument yet…


27

SCT Statistics (1)% of European ACH Volumes

Source: ECB


— …but is widely used for cross-border payments


28

SCT Statistics (2)XCT vs SCT

Source: EBA

* Credit transfers that are in line with the convention on credit transfers in euro of the European banking industry, i.e. retail payments of up to 50,000 euro per transaction.

0

100000

200000

300000

400000

500000

600000

700000

Ap

r 0

8M

ay

08

Jun

08

Jul 0

8A

ug

08

Se

p 0

8O

ct 0

8N

ov

08

De

c 0

8Ja

n 0

9F

eb

09

Ma

r 0

9A

pr

09

Ma

y 0

9Ju

n 0

9Ju

l 09

Au

g 0

9S

ep

09

Okt

09

No

v 0

9D

ez

09

Jan

10

Fe

b 1

0M

rz 1

0A

pr

10

Ma

i 10

Jun

10

Jul 1

0A

ug

10

Da

ily #

of

XC

Ts

& S

CT

s

Month

EBA Step2No. of XCTs vs. SCTs

# of XCTs

# of SCTs


— SDD volumes are currently negligible

— There are various reason for this…


29

SDD StatisticsNumber per Day

Source: EBA


1. End date for existing domestic schemes

2. Reachability of debtor banks

3. Validity of existing mandates

4. Core SDD with D-1 submission deadline

5. Information/education of consumers


30

Dependencies for SCT/SDD Migration



31

1. End Date for existing domestic SchemesApproach of the European Commission

— End-date consultation during summer 2009— Result: majority favors end dates

— End 2009 / Beginning 2010: Resolutions by European Parliament and ECOFIN Council ask Commission for end dates

— Working paper for regulation of end dates published in June 2010:— Regulation by EU Commission (to be published in September/October 2010)

— End date for EUR credit transfers 1 year after entry into force / 2 years for EUR direct debits

— 4 years for both CTs and DDs for non-Euro countries

— But only for EUR-transactions

— End-to-end format (ISO 20022) regulation (not just inter-bank)

— Niche products (<10 % of total volume of an instrument within a country) can be excluded for 3 years after entry into force

— EPC rules not considered – instead definition of so-called “Essential Requirements”



32

2. Reachability of Debtor Banks (1)


— Reachability dependent on EPC adherence process and EU Regulation 924/2009— Regulation 924:

— Mandatory reachability for Core SDD for all banks in the Euro-Zone by November 2010

— November 2014 for non-Euro-Zone EEA countries

— Optional reachability for B2B SDD remains


33

2. Reachability of Debtor Banks (2)


— Continued legal validity for Core SDD ensured for most countries

— No solution found yet for Germany— Currently, need to obtain new mandates

— Due to recent developments in Germany, a solution is expected


34

3. Validity of existing Mandates


— Of interest for certain countries

— D-5/D-2 can potentially have negative effects, e.g:— Delayed liquidity

— Increased risk

— More complicated processes

— D-5/D-2 does not make sense for countries where no mandate check occurs

— Status: Under discussion as an AOS in e.g. Germany


35

4. Core SDD with shortened Submission Deadline


— Currently:— Slow SCT migration

— Voluntary SDD adherence process for banks

— Until November 2010:— SDD pilots

— Mandatory reachability for Core SDD of all banks in the Euro-zone

— From November 2010:— Slow SDD migration

— 201?: — End date for existing domestic instruments

— Mass migration to SCT and SDD


36

Expected Migration Scenario

Corporate Preparation

Analysis

Budgeting

Planning

Implementation

End of Project

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