Ladies and Gentlemen,
Thank you for inviting me to address you this evening on MiFID, the Single Euro Payments Area and the Payments Services Directive.
These are turbulent times for the financial sector.
More than ever, there is a need for good legislation and projects which have the potential of delivering real added value for citizens, businesses and financial intermediaries themselves.
I strongly believe that this is the case for the three projects we are to discuss tonight.
Let me start with the Markets in Financial Instruments Directive (MiFID).
Since the Directive came into force in November 2007, our current priority is ensuring the effective application and complete transposition of the Directive in all Member States.
Our view is that MiFID has largely been a success. Markets have become more competitive, service providers are able to move around Europe more easily, the integration of European capital markets has been promoted, and the investor protection innovations in MiFID are generally being welcomed by both industry and investors. Together with the other parts of the EU Financial Services Action Plan (FSAP), MiFID is expected, over time, to lower the cost of capital and to bring major benefits for the European economy.
New trading platforms have quickly challenged the pre-eminence of traditional stock exchanges - compelling the latter to reduce their fees and revamp their services. Even in the depressed market conditions of the past year, we have witnessed a creative boom amongst trading infrastructures.
Investors are also better off in the wake of MiFID. By introducing important safeguards and extending the scope of activities subject to regulation, it has made valuable improvements to how and which products may be sold to clients.
MiFID has shown itself to both foster innovation in financial markets and buffer prospective clients and less experienced investors from their more complex and risky features of the available products.
We continue to closely monitor developments in securities markets post-MiFID and are in close contact with market participants and financial regulators to address any hiccoughs.
A worry that is often heard, especially here in the UK, is that the transparency and quality of trading data has suffered as a result of MiFID. And, that because MiFID permits the reporting of trades from multiple venues, it may be harder to get an overall accurate picture of the market.
For the time being, we are still gathering data and evidence in order to assess the gravity of this issue. Arguably, these can also be seen as teething problems and the markets have appeared, to date, to be capable of correcting most of the gaps in the present situation. The new competitive reality unleashed by MiFID demands that investment firms, exchanges and data vendors assume greater responsibility and ownership of the market segments they participate in. The efficiency of the post-MiFID securities markets is, to a far greater degree, in the hands of those they serve – it is no longer simply offered by a central exchange or authority. The markets need to show that this responsibility is well-placed.
Of course, national authorities and the Commission have a role to play where the market cannot deliver. So far, however, in relation to changes and provisions introduced by MiFID, we are nowhere near there yet. But we continue to evaluate the situation closely.
Let me now turn to the Single Euro Payments Area.
I believe that SEPA is a tremendous opportunity for Europe. To have an efficient single market, we need an efficient and integrated payments market. It is really that simple. This point has not been lost in the UK. The success of the Faster Payments Service is a powerful witness to this fact for sterling payments in the UK. And with SEPA, we can achieve the same for euro payments throughout the whole of the EU.
To make SEPA a reality, banks, corporates, software vendors and other stakeholders are investing money - substantial sums of money – to ensure its success. One major international bank[1] told me that they have invested over 40 million euros - with more to come. We cannot afford to squander investments like this. So we need rapid SEPA implementation or migration.
I know one of your major concerns with SEPA is that the PSD will not be implemented on time, consistently and completely.
I am therefore very pleased to confirm that we are on-track. All Member States are committed to transposing the PSD into national law by the 1st of November 2009 and the Commission services will keep up the pressure to ensure that this deadline is respected.
Achievements
But of course SEPA is a market-driven initiative and therefore the lion's share of the burden to launch SEPA must be carried by industry. In my view, industry has had a very successful SEPA year:
- On 28th January we saw the successful launch of the SEPA Credit Transfer (SCT). Although volumes are still low, they are significant and growing[2].
- The basic SEPA Direct Debit (SDD) rulebooks are now in place.
- On cards, the EPC have published clarifications on the SEPA Cards Framework and made progress with card standards.
Lastly, on governance, we welcome the improvements to the EPC Customer Stakeholder Forum. The short-term focus should, rightly, be successfully launching SEPA, but longer term we may need to review and widen the architecture to include more users. The UK approach could provide inspiration.
So what are the challenges we still face?
I see three major challenges ahead:
First, for a successful launch of the SEPA Direct Debit we need to resolve two key issues:
- One is ensuring the continued legal validity of existing direct debit mandates under SEPA. The unnecessary costs and administrative burden of re-signing billions of mandates is something we must avoid.
- The other issue is to develop a viable business model for the SEPA Direct Debit. The Commission and the ECB recently published a press release to provide some guidance to industry on multi-lateral interchange fee.
The second challenge is to encourage rapid SEPA migration by public authorities. As heavy users of payment instruments, public authorities can make a substantial contribution to SEPA migration. We are collecting information and data on SEPA migration by public authorities. Although considerable efforts are being made, more could be done.
Finally, the third challenge is to start a sensible debate on a possible SEPA end-date. This will increase certainty and reduce the unnecessary expense caused by the operation of dual payment systems.
To tackle these issues, the Commission and the ECB are currently assessing the merits of a joint initiative, but details need to be fleshed out.
In closing, I would like to stress that, although the UK is outside the euro area, the commitment and support by the UK financial services industry to SEPA is greatly valued and appreciated.
Although we have come a long way, and made significant achievements in these areas, we still have work to do. We must ensure that these initiatives are implemented on time, consistently and completely and that overall we - both regulators and the industry - remain vigilant and address issues as they arise. If we do this we all gain from the significant benefits that these initiatives will deliver.
Thank you for your time.
[1]
Deutschebank
[2] The latest figures
(July) show approximately 1.2 % of transactions using SEPA standards.
