Now that it is all but official that the UK will leave the EU on the 20th March 2019, there will doubtless be a flurry of activity by firms, particularly within the financial sector, to try to establish what the various scenarios and implications of Brexit will mean for them.
In many cases, it is simply impossible to know what form a post-Brexit world will take. Will British citizens need to apply for a visa when visiting Europe; and will the same apply to Europeans travelling the opposite way? Will financial services firms still be able to “passport” their services into EU countries? Will the UK solve the “Irish Border” question by remaining in the customs union?
There will be many issues that remain unresolved throughout the transition / implementation period which is expected to run between March 2019 and 31st December 2020, during which period EU law will still apply to Britain, and possibly beyond. This is the reason why, for the sake of clarity, the European Payments Council has moved to issue a Position Paper advising on the implications of Brexit on Britain’s membership of the Single European Payments Area.
SEPA was introduced to improve the efficiency of cross border payments made in Euros between EU member countries, plus the 4 member states of the European Free Trade Association; Norway, Liechtenstein, Switzerland and Iceland, and Andorra, Monaco and San Marino.
The scheme allows its members to send cashless euro payments to one another with just a single set of instructions and single bank account, cutting out unnecessary paperwork and admin, speeding up transaction times, and helping to drive down the overall costs of moving capital across the region.
In the UK, there are 82 Payment Service Providers (PSPs) participating in the SEPA credit transfer scheme, 38 in the accompanying Direct Debit scheme, 26 in the B2B, and 1 that has adopted the latest instant transfer SCT scheme.
Hence, it is important that the European Payments Council (EPC) makes its post-Brexit position clear, and it has attempted to do so with the release of a Position Paper that is it has written after consultation with the UK PSP community, and UK Finance. In fact, discussion first began back in October 2016; so far the EPC has adopted a “wait and see” approach.
In this latest paper, the EPC outlines 3 different scenarios and suggests how it will approach each one differently. These are as follows.
Will UK PSP’s be permitted to remain of SEPA post Brexit?
1/ If Britain leaves the EU but remains within the European Economic Area, the EPC believes that little would change. As a member of the EEA, UK laws and regulations remain aligned with those of the EU, allowing UK PSP’s to continue to participate in the SEPA scheme with impunity.
2/ If Britain leaves both the EU and EEA, but “puts in place a free trade agreement between the EU and UK which results in ‘functional equivalence’ of the EU legal framework”, then, as above, the likelihood is that UK based PSPs will be permitted to continue to participate in the scheme. In this scenario, however, the EPC advises that it “may have to assess and confirm any functional equivalence of the UK’s legal framework with European Union law.”
3/ In the event that the UK does none of the above i.e. leaves the EU. the EEA, and does not establish any kind of free trade agreement, then the EPC advises that it will consult with the UK’s PSPS directly, who will be permitted to make an application to them directly for access to the scheme, which is likely to be granted.
All things considered, then, positive news. The EPC clearly wants UK based PSPs to continue to participate in SEPA, and it would take an extreme scenario; one where UK PSP’s refused to deal with the EPC or express an interest in remaining within the scheme; to create a schism.
This can be considered good news and shows that, even if politicians are struggling to establish a set of mutually agreeable conditions for a successful Brexit, the progress of cheaper, faster, and more transparent financial services does not necessarily have to be checked as a result.
Another example of disruptive tech building bridges, whilst politicians insist on putting up walls, perhaps?
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