As part of the migration to the Single Euro Payments Area ("SEPA") standards for payment transactions, the Dutch Payment Service Providers ("PSP's") have been amending their IT-environment by replacing the Dutch 9-digit Basic Bank Account Number ("BBAN") format by the 18-digit International Bank Account Number ("IBAN") format. According to Regulation (EU) No 260/2012, establishing technical and business requirements for credit transfers and direct debits in euro ("SEPA Regulation"), the migration to these standards should have been completed by 1 February 2014.
Due to the low migration pace for SEPA credit transfers ("SCT") and SEPA direct debits ("SDD") in certain European Union ("EU") member states, the European Commission ("Commission") anticipated in 2013 that a significant number of PSP's in the EU would not meet the SEPA migration deadline of 1 February 2014. In order to prevent market disruptions in the payment sector, the Commission published on 9 January 2014 a proposal (COM (2013) 937 final) for a Regulation amending the SEPA Regulation ("Amended SEPA Regulation"), which entered into force on 31 January 2014.
The Amended SEPA Regulation extends the migration end-date by allowing PSP's to process Euro payment transactions in formats that are different from those required for SCT and SDD until 1 August 2014. As the Amended SEPA Regulation allows for parallel processing of payments in different formats, PSP's are no longer obliged to refuse processing payment transactions that are not compliant with SEPA standards until that date.
In order to facilitate payment service users ("PSU's") during the SEPA migration process, a number of PSP's offered conversion services enabling PSU's to continue using BBAN when initiating payment transactions until 1 February 2014 ("IBAN Conversion Services"). As the migration end-date has recently been extended until 1 August 2014, the Dutch Minister of Finance informed the Dutch House of Representatives (Tweede Kamer) on 30 January 2014 of his intention to request a dispensation from the Commission to allow PSP's to continue to provide IBAN Conversion Services until 1 February 2016. Said dispensation is commonly referred to as the "SEPA Waiver".
Transitional provisions migration BBAN to IBAN
We note that the SEPA Regulation provides EU member states with the option to allow PSP's to provide IBAN Conversion Services for national payment transactions until 1 February 2016. Said extension is only allowed if interoperability is ensured by converting BBAN securely into IBAN. Furthermore, the SEPA Regulation prescribes that a member state is only allowed to apply said option if it has notified the Commission thereof by 1 February 2013.
As part of the extension of the SEPA migration end-date, the Amended SEPA Regulation also highlights the option for member states to allow PSP's to continue to provide IBAN Conversion Services until 1 February 2016. Unfortunately, the Amended SEPA Regulation failed to amend the prescribed date by which the Commission should be notified for that purpose. Although we believe it was unintended not to change the notification date, we note that as a consequence hereof, the Commission does not have a legal basis to grant a SEPA Waiver when it has been notified after 1 February 2013.
As the payment infrastructure has already been modified in order to meet the SEPA requirements, we note that a PSP can execute a BBAN initiated payment transaction solely by means of the SEPA Conversion Services. Subsequently, the peculiar situation arises in which PSP's are allowed to process payment transactions that are initiated in the BBAN format until 1 August 2014 but are not allowed to convert BBAN initiated payment transactions to the IBAN format as the Dutch authorities have not notified the Commission by 1 February 2013.
In addition to the above, we note that there also remains uncertainty as to the technical possibilities and willingness of banks to continue providing the IBAN Conversion Services to PSU's. The Dutch Banking Association (De Nederlandse Vereniging van Banken) has announced that it will request the National Forum for SEPA Migration for advice regarding this matter.
Although the Amended SEPA Regulation highlights the possibility for EU member states to allow PSP's to provide IBAN Conversion Service until 1 February 2016, said regulation failed to amend the notification date prescribed by the SEPA Regulation. Although we believe that it is the intention of the Commission to enable PSP's to continue to provide these services until 1 February 2016, the Commission does not have a legal basis to grant a SEPA Waiver when it has been notified thereof after 1 February 2013. We note that this omission results in a lack of clarity for the participants in the payment sector and will therefore have a negative influence on the migration towards the SEPA standards for payment transactions.