Banks face up to Sepa deadline
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Banks face up to Sepa deadline

Banks need to take urgent measures to meet the February 2014 deadline for the establishment of the Single Euro Payments Area, the EU’s flagship cross-border payments system.

The world breathed a sigh of relief on December 21, 2012, as the Mayan-prophesized doomsday passed without incident. However, for the transaction banking industryanother date is expected to change the landscape more significantly: February 1, 2014 – the migration deadline for the Single Euro Payments Area (Sepa). Intended to make payments between European countries as fast, cheap and simple as domestic payments, Sepa was initially supposed to be market driven, with legacy payment schemes continuing to exist alongside the new instruments, the Sepa credit transfer and Sepa direct debit.

However, when Sepa adoption levels remained low, the European Central Bank (ECB) and the European Commission (EC), among others, pushed for the establishment of an EU-wide cross-border payments system through a harmonized legal framework. And in February 2012, the European Parliament passed legislation requiring businesses to migrate to Sepa by February 1, 2014.

The establishment of a cross-border payments scheme fulfils the newfound spirit of EU integration, given the recent push for a banking and fiscal union. However, to date, most corporations and many banks have been reluctant to invest in Sepa, but with the deadline rapidly approaching – and unlikely to be delayed – Sepa has, at last, become impossible to ignore.

“I’m sure there are some banks that previously viewed Sepa as a nice-to-have rather than as a strategic project,” says Ruth Wandhöfer, head of regulatory and market strategy, global transaction services at Citi. “Some thought there was a possibility it would never really happen but this perception changed early last year.”

Corporate treasurers have likewise begun to take Sepa more seriously, although many have yet to complete or even begin migrating to Sepa. Research published last month by EuroFinance found that, of the corporate respondents surveyed, more than half of those in the Sepa zone have not yet begun migration.

This sentiment is reflected by the Sepa statistics published by the ECB in October. Less than a third of credit transfers in the eurozone are conducted using Sepa instruments, according to the ECB’s figures. A mere 2% of direct debits are Sepa compliant.


To meet the February 2014 deadline, the industry has a lot of work to do in the coming year – and in fact the official deadline is somewhat deceptive. Dieter Stynen, head of cash management corporates western Europe and head of global transaction banking, Belgium, at Deutsche Bank, points out that the end of the year is typically characterized by IT freezes for banks, systems vendors and corporations.

“Therefore, companies should aim for project completion by November 2013 at the latest – there is certainly no time to waste,” he observes.

As companies focus on Sepa migration projects, demand for Sepa services is likely to soar in the coming year.

Steve Everett, global head of cash management at RBS, says there will “undoubtedly” be a substantial increase in demand for Sepa services in 2013 – but the question is at what point this demand will start to spike.

“In terms of the total payments that go through the market, there’s still a very small proportion going through Sepa,” he observes. “Those payments have to migrate to Sepa, so at some point there’s going to be a large spike. We would like to see a smooth ramp up from Q2, but my guess is that it is not until the end of the year and the beginning of 2014 that we will see a lot more take up.”

Will banks be ready for the Sepa resources spike when and if it comes? Enrico Camerinelli, senior analyst at Aite Group, believes “banks have had enough time to prepare for the introduction of Sepa, so they are properly staffed for internal back-office operations.

“It will be more likely that corporations will suffer from a resource constraint, since banks have not been sufficiently active in sharing information regarding the effects of Sepa on their clients’ business. As a consequence, banks may suffer from resources constraints on the relationship side, as they will have to serve concurrent requests for help from their corporate clients.”

Ready or not?

Banks are aware of the possibility of a bottleneck – but what are they doing to prepare themselves?

“We have put in place quite a large change management structure both internally and externally,” says Alain Grugé, global head of corporate cash management at Société Générale.

“Internally, we have conducted several training sessions with our front and back office to educate them about Sepa. Externally, we have hosted a large number of events with customers since September to inform them about this issue and present various solutions, and this information programme will be maintained during all of 2013.”

Everett says that RBS has been ramping up its Sepa resources to get clients across the line ahead of the February 2014 deadline, while Stynen comments that Deutsche Bank has “put in place a lot of self-service tools for Sepa, including a dummy testing environment enabling clients to test Sepa files and make sure they are compliant”.

Ray Fattell, HSBC’s payments and cash management global head of product, says the bank has been looking at historical adoption patterns and has been working to ensure that both staffing levels and the technical infrastructure are sufficient for the projected demand over the course of the year.

However, Fattell points out that while the requirements from existing clients can be predicted to a certain degree, what is less certain at this point is the demand from potential new clients who might be looking to change banks as they begin their Sepa migration.

Corporations are aware they need to act now to complete their Sepa migration before the deadline. However, with large numbers of companies likely to be focusing on compliance projects in the coming 12 months, there is a need for banks to prepare for the additional demand.

Measures have been put in place – but whether they will they be sufficient remains to be seen.

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