EBA Clearing has announced reforms to
the EURO1 system as part of a wider review to enhance the system’s
efficiency. The announcement coincided with EBA Clearing’s call for
a pan-European online banking e-payments project. Duygu Tavan
speaks to John Broxis, director at EBA Clearing about the two
initiatives
Go deeper with GlobalData
EBA Clearing, the clearing and settlement
operation of the Euro Banking Association, has announced changes to
the EURO1 platform, the bank-owned clearing and settlement system
for cross-border and domestic euro payments at a pan-European
level.
It was set up in 1998 as a means for an
efficient and secure settlement infrastructure that would enable
banks to process large value payments immediately in euros.
The average daily value of payments processed
within the EURO1 system is €245bn ($334bn) and there are 67
participating banks in the system, processing about 230,000
payments every day.
These payments are irrevocable and are settled
through the European Central Bank.
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By GlobalDataNow with increased risk exposure across Europe
due to the sovereign debt crisis, EBA Clearing has announced
that it will reduce the minimum bilateral loss sharing credit limit
for banks in the system from €5m to €2m.
This reduction will reduce the credit risk
exposure on both sides. Conversely, EBA Clearing will double
the maximum bilateral credit limit to €50m to enable banks to
increase the discretionary limits in low-risk cases. The new limits
will take effect on 24 October.
John Broxis, director at EBA Clearing says
that the changes to the limits are part of EBA’s strategy to give
banks more control and flexibility in managing risk in the EURO1
system.
“The changes allow banks more flexibility by
reducing their risk against counter parties that they are concerned
about – but also allow them exposure between those banks that are
confident to do business with each other,” he says.
“Today, the banks in the system have the same
amount of exposure to each other.”
In addition to these changes, EBA is also
moving the deadline for changing bilateral limits in the EURO1
system from 6pm CET/ 5pm GMT on D-1 (day before) to 7am CET on
D.
Until now, when the system closed on Fridays,
banks had to wait until the next Monday to react to risk if
political events occured during the weekend. This change would then
take effect on Tuesday morning.
Now, with the new deadlines for bilateral
limit changes, banks can make changes to their exposure before the
systems opens, says Broxis.
“Banks will be increasingly compelled to know
what their exposure is. In order to do this, they will need to
adapt their systems. We and others will need to adapt our systems
to provide this information and add value by having this
information for banks in a way that they can access. This will move
the banks to a more real-time environment in terms of managing
liquidity,” Broxis says.
Call for MyBank
initiative
In addition to the changes to EURO1, EBA
Clearing is calling all banks to participate in a pan-European
online banking e-payment pilot project.
The MyBank initiative is planned to go live in
May 2012 and EBA Clearing is asking banks and e-merchants to
participate in the pilot.
EBA Clearing has undertaken a consultation
with stakeholers, e-merchants, payment service providers and
integrators in the summer.
The Europe-wide online banking e-payment
solution would enable customers to pay for online purchases through
regular banking interfaces, says Broxis.
“MyBank will be a button that appears on the
websites of merchants or utility companies where one wants to set
up a direct debit. The customer, when setting up a direct debit,
clicks on the button and it takes them to the internet bank where
they log on and can make the payment or set up the direct
debit.
“You click ok and the bank confirms to the
merchant that you are who you say you are, that this is your bank
account and that it has funds in it. It means you’ve done the
complete payment without giving your card details to a third party,
without giving any of your personal details on the web and its all
been done through the safety and security of your internet bank,”
he explains.
The main ambition of MyBank is to cancel out
or at least keep to a minimum the fraud that is nowadays so common
in online payments. Broxis is confident that fraud will be
“nearly impossible” unless somebody gives their internet banking
details to somebody else.
“No such scheme exists across all of Europe
and this exists for making payments and buying things and setting
up direct debits. This is new,” argues Broxis.
So far, 30 banks have signed up and Broxis
says that these “are the biggest banks in Europe.”Whether MyBank
really becomes a reality will depend on the success of the pilot as
banks will have to subscribe to the service.
“The first measure of success will be the
number of merchants that adopt it and the number of customer
accounts that we reach. We will then expect to see a growth in the
number of transactions,” Broxis says.
The MyBank project comes at a time of
regulatory pressure on banks to implement e-commerce solutions. If
the adoption rate is as great as EBA Clearing hopes, MyBank could
be implemented into national payments plans at a local level as
well, giving the platform official status within particular
countries.
According to Broxis, there is a “very high
demand, even a frustration, from the merchant community” about a
lack of initiatives from banks.
“This summer a consortium of merchants
associations got together to create a list of demands that they
would like to see on a pan-European basis from the banking
industry. The demands include a bank-provided online payments
solution and also a pan-European SEPA direct debit mandate
solution.
“[MyBank] is very much responding to the needs
of the merchants, but also to that of consumers. The European
Commission’s digital agenda for Europe points to research around
the number of people who refuse to buy online or who limit their
online purchases to the few entities that they trust. It’s about
security, trust and convenience. They don’t trust the internet and
they need the banks to step in and give them a tool they can use in
a context that they trust,” urges Broxis.
“The aim of this is a European scheme. Looking
further ahead, there is an organisation, ICPNO, that aims to link
these types of schemes together and we are working with them. We
are looking at a future where these become interoperable or work in
some way across the different borders – but that is beyond our
thinking at the moment.”
