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ANKS, businesses and citizens in Jersey and Guernsey who are involved in pan-European business transactions look set

to benefit from faster and more efficient electronic euro payments in the future. This is because both islands are considering joining the Single Euro Payments Area (SEPA), a project which aims to harmonise – and cut the cost of – electronic euro payments in and between SEPA member countries. However, while Guernsey is still exploring

the merits of SEPA, Jersey, which believes that non-membership could put it at a ‘competitive disadvantage’, has already got the ball rolling – despite the unavailability of admittance criteria for third-party countries. The Jersey Financial Services Commission

(JFSC) has recently issued law drafting instructions in relation to two of the EU’s Payment Services Directive’s (PSD) main SEPA requirements: payment services providers’ provision of common information to end users and the rights and obligations of both payment services providers and users. Once these new laws are approved

and enacted, the JFSC plans to submit its application to join SEPA to the European Payments Council (EPC). “We have decided to demonstrate to the EPC that we have legislation in place that mirrors the PSD, and we have already issued law-drafting instructions,” says Andrew Le Brun, Director of International and Policy at the JFSC. “The exact timing of Jersey’s application

and how long it will take to secure approval is difficult to determine, but we would like to be a member of SEPA by the time it is widely used in Europe.” He points out that there are no current

proposals to implement the PSD for domestic payments in Jersey, meaning that any new laws will only apply to cross-border euro payments. The JFSC is also seeking to achieve minimum rather than advanced compliance with the PSD, which has wider implications for payments services, although this may be reviewed later.

Stay out, miss out? The decision to move full-steam ahead on SEPA follows Jersey’s publication of a consultation paper and industry feedback last year, which revealed strong support for the initiative from Jersey’s banks. Although the Jersey Bankers Association declined to speak

Banks are concerned about Jersey maintaining its attraction as a jurisdiction in which to hold euro bank balances if it stays out of SEPA

to, Le Brun points out that banks are concerned about Jersey maintaining its attraction as a jurisdiction in which to hold euro bank balances if it stays out of SEPA. The euro is one of the main currencies held in Jersey, alongside sterling and the US dollar. “In the future, as SEPA becomes more

widely used, it will be possible to make a bank transfer in euros from one country in Europe to another for a relatively small fee,” he says. “If Jersey stays out of SEPA, banks will have to continue using existing payment frameworks, such as SWIFT, for cross-border transactions, and their charges will be significantly higher.” “There are some banks in Jersey – clearing

banks in particular – that believe this is the right route to follow,” he continues, pointing out that, as many of these banks are part of larger groups with an EU presence, they will benefit from existing group SEPA-related initiatives and systems development. However, Le Brun points out that SEPA

is not necessarily advantageous or even necessary for every bank. “Private banks will be less troubled by any disadvantages presented by not joining SEPA,” he explains. To deal with this, the JFSC is not placing

banks and payment services providers, which see no benefits in SEPA, under any obligations to join. “One of the benefits of what we are proposing is that the transition to SEPA will only affect those who elect to use it,” says Le Brun. “For banks that want to use SEPA, they

will have to follow the requirements. Financial institutions that don’t believe there are any benefits won’t be expected to comply.” SEPA membership is expected to bring

‘The decision is a vindication of Jersey’s policies of adopt- ing tougher anti-money laun- dering standards’

good neighbour policy and has always aimed to support local and international standards. At the same time, it is also very important for us to ensure that we are at the cutting edge as an international financial centre.”

The waiting game Meanwhile, both the Guernsey Financial Services Commission (GFSC) and the Association of Guernsey Banks (AGB) are considering the merits of joining SEPA, and are waiting to see the EPC’s admittance criteria before committing themselves. “Guernsey is largely dependent on

sterling-payment traffic and doesn’t have

added consumer protection, as well as cheaper cross-border payment services for non-resident citizens of Jersey who hold euro accounts; residents with business relationships in Europe; and European residents and businesses transacting in euros with Jersey. “The banking community thought this

would be a good thing to ensure cheaper and faster payments in euros. For citizens that live or work abroad, or have properties in Europe, this will make the transfer of funds much easier,” explains Heather Bestwick, Technical Director at Jersey Finance. “Jersey as a third country has always had a

➔ August/September 2011 37

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