Draft European Commission regulation – 24 July

24th July, 2013

A European Commission press release on the proposed new rules on payment services was published today. Although it requires further analysis, the APB wishes to express some immediate doubts about some of the measures and their actual effectiveness.

On the one hand, the initiative runs the risk of the outcome being dominated by undesired effects that will outshine the good intentions behind it.

In fact, the measures that the European Commission proposes may sacrifice the current quality payment systems and even its desired innovation, thereby losing all its users, especially consumers. The European Commission's regulation does not eliminate the costs of operating the payment system; it only involves repercussions for its users: retailers and consumers.

Experience from other markets in which similar regulations, such as price control, have been imposed shows that, as a result of confusing a distribution process between the parts of a value chain with consumers' interests, consumers were the ones who lost out the most, and expectations were not met. The main beneficiaries of these measures will be large distributors, one of the most profitable economic sectors.

Furthermore, the proposal may actually be counterproductive, as it comes at a time when the banking markets in the euro area are fragmented, with particularly adverse conditions for peripheral countries and their banks, because the inefficiency of the monetary union system has resulted in a shortage of funding and considerable cost differentials. In these circumstances, in which the internal market is segmented and clearly imbalanced in detriment of these countries and their banks, imposing standardised conditions on payments, thereby destabilising well-established business models, can only worsen the adverse conditions in which they are operating and further unbalance competition in the internal market.

On the other hand, planning to impose central regulation on an activity in which 93% of transactions (97% in Portugal) are completely national, as recognised in a recent ECB report, and that has developed by adjusting to each country's specificities, seems to undermine the principle of subsidiarity, which is essential to the whole European integration process.

Portugal has one of the best, safest and most convenient, innovative and efficient payment systems in the world and everyone in Portugal has benefited. And the system's economic model has enabled consumers to use a particularly effective ATM network that offers services that are unparalleled in other European countries.

The Portuguese banking system is willing and able to help improve the proposal to avoid its most unfavourable effects.

Portuguese Banking Association