The European Banking Authority (EBA) has published its final draft Regulatory Technical Standards (RTS) on the separation of payment card schemes and processing entities, under article 7(6) of the European Interchange Fees Regulation. The draft RTS have also been submitted to the European Commission, Parliament and Council for possible adoption. In all probability, they will be in force before the end of the year.

The European Interchange Fees Regulation has been fully in force and directly applicable across the EU since 9 June 2016. It’s best known for capping interchange fees on debit and credit card transactions, but it also requires the separation of payment card schemes and processing entities – even if it doesn’t say much about what this means.

Article 7 of the Regulation provides that:

(1) Payment card schemes and processing entities:

(a) shall be independent in terms of accounting, organisation and decision-making processes; [and]

(b) shall not present prices for payment card scheme and processing activities in a bundled manner and shall not cross-subsidize such activities;

(3) Payment card schemes shall allow for the possibility that authorization and clearing messages of single card-based payment transactions be separated and processed by different processing entities.

(6) The [EBA] may … develop draft regulatory technical standards establishing the requirements to be complied with by payment card scheme and processing entities to ensure the application of … paragraph [(1)(a)] …

The EBA’s draft Regulation Technical Standards supplement this with provisions governing (for example):

  • the allocation of expenses and revenues (article 4)
  • the documentation of transfers of funds between payment card schemes and processing entities (article 5)
  • functional separation (article 7)
  • workspace separation (article 8)
  • the independence of senior management and staff (articles 9 and 10)
  • remuneration (article 11)
  • the use of shared services, and a shared information management system (articles 12 and 13)
  • the independence of management bodies and operating plans (article 16 and 17)

The European Commission has until 27 October 2016 to decide whether to endorse the EBA’s draft RTS in full, in part or with endorsements. If the Commission adopts the draft in full (as seems likely), the Parliament and Council will have a month to object, which they can extend by a month if they wish. If the Parliament and Council do not object, the RTS will be published in the Official Journal of the EU and enter into force on the 20th day after that. We should probably therefore expect them to be in force, and directly applicable in and across the EU, before the end of the year.