Crisis may slip the end of SEPA implementation?

SEPA (Single Euro Payment Area) which called life by European Central Bank (ECB) to eliminate financial borders among European zone countries. The cross border money transfer has been made by counties central clearing houses through ECB’s central clearing house.

So the country inside money transfer remains subject of national clearing houses. If a beneficiary of a remittance is beyond the borders of a country, the local clearing house passed the payment to the central clearing house, which transmits it to the beneficiary’s bank clearing house. The needed cover to the remittance is provided by the national bank of the departure’s country over Real Time Gross payment System (RTGS). As you can see from the above, the most fundamental requirement of SEPA is that customers not take any notice from the fact that receiving or sending payments at home county or any other countries in Europe. Be enough one account to corporate and retail clients to handle all financial issues in Europe is an important aim of SEPA.

Furthermore, because of a decision made by ECB, SEPA is based on ISO20022 standard XML type payment messages which differ greatly from the previously used ISO15022 standard MT type messages. The implementation of new message standard has been justified by straight trough processing an overall cheaper transfer cost for banks. After the release of SEPA at 2008 banks and clearing houses still operate with domestic formats and use SEPA only for cross border payments. The ECB, however, because of the obvious benefits expected that by 2014, the majority of payment messages will be compliant with the ISO20022 standard in the European financial world. In contrast of this the SEPA message ratio on domestic payment is only 30% in the most prepared country, according to a survey was conducted last years. In addition, by a fast survey was made at SIBOS conference which closed at Friday, banks don’t feel like to invest to a not vital development.

T2S implementation has been delayed

Target2 Securities (T2S) project was released by European Central Bank (ECB) to simplify cross border securities exchange. The project realization can be made of the following way by the joined counties central securities depositories (CSD):

·            Extend the current set-up with T2S platform

·             Full integration of system with T2S to enhance efficiency

The fist way is carry out fast and doesn’t need big investment, but do not really solve that problem of what the T2S called alive by ECB, because process duplication still remain in cross border securities exchange process. The second solution is apparently better for long term, and has ECB’s support. But carry out that solution is more expensive. Furthermore CDSs fells that T2S implementation cause remarkable income loss.

Negotiation is still ongoing so ECB decided to shift T2S implementation to 2015. Being the biggest beneficiary of the T2S project, global custodians is become disappointed by the decision. To them T2S significantly simplify the European securities trading and considerably reduce their costs.

Author: Vilmos Levente Kovacs (mt2mx)

City becomes empty due to ECB regulation?

European Central Bank (ECB) planning to prohibit trading with Euro denominated assets outside Euro zone. Big clearing houses will move to Frankfurt due to the regulation and City will become empty. The effort is obvious that the ECB can exercise greater oversight of the trading of euro-denominated assets and thus indirectly the over euro exchange rate. In addition to have more direct intervention possibility. Besides this common sense also dictates that the Euro trading center be the same like ECB headquarter.

In 1992 Great Britain had to leave Europen Exchange Rate Mechanism (ERM) and have been staying away from the European standardization of financial processes. That is the event when George Soros received the demolisher of British pound nick name. Staying away from Euro haven’t been significant disadvantageous to British production and to City until now. But it is obvious that England missed the benefits of the single currency. Therefore competitiveness inevitably reduces sooner or later.

PayPal’s break out form online world?

PayPal is arguably the most successful company in the field of Internet payment. The service currently can be reachable in 190 countries, and has more than 100 million active clients, and can manage transaction more than 20 currencies. For long time ago PayPal have been planning to expand its business to brick and mortar on the satisfied client base. PayPal not intended to be different, what easy and fast payment method is common on the internet to achieve outside online world. PayPal is planned to use the following two technologies to realize the nearly immediate money movement:

·         Scan of bar and QR code

·         Near Field Communication (NFC)

The expected control of used technology will be managed by an installed application on gadgets. The payment process itself will happen on PayPal’s own network or over card companies. Of course immediate payment only can happen within PayPal network. However, if technologically feasible that a merchant can connect to PayPal with using card companies infrastructure the 7/24 immediate payment can be realized. If PayPal’s plans will be implemented, it make immediate exigency to banks and clearing houses. I think this would be the moment, when XIX century approach is finished in account management.