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Charlie McCreey’s speech to the Financial Services Club

I was proud to host Charlie McCreevy at the Financial Services Club last night.  Here’s the full
of his speech:

The Financial Services Club
London, 2nd October

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* 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

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.


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
  • 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.

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.

* Deutschebank

** The latest figures
(July) show approximately 1.2 % of transactions using SEPA standards.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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