Shearman & Sterling LLP | Financial Regulatory Developments Focus | European Commission Proposes Extending Fee Cap to Non-Eurozone Member States
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  • European Commission Proposes Extending Fee Cap to Non-Eurozone Member States
    The European Commission has published a proposed Regulation to amend the Regulation on cross-border payments in the EU. The Regulation on cross-border payments provides, among other things, that charges for cross-border euro payments within the Eurozone must be the same as charges for domestic euro payments. Member States outside of the Eurozone were given the option to extend the application of the Regulation to their domestic currency. Only Sweden opted to do so.

    The proposed amending Regulation extends the scope of the fee cap provisions to EU Member States outside of the Eurozone for euro-denominated payments. A payment service providers' charges for cross-border euro payments will be required to be the same as that charged by the PSP for a domestic payment of the same value in the official currency of the customer's Member State. Cross-border transactions in currencies other than the euro are outside of the scope of the fee cap proposals. The proposals aim to put an end to the high cost of intra-EU cross-border transactions in euro.

    In addition, the Commission is proposing to impose disclosure obligations on PSPs that go beyond those already imposed by the new Payment Services Directive. PSPs will be required to disclose to their customers the full cost of their currency conversion services, and where applicable, those of alternative currency conversion services, before a payment transaction. This proposal is intended to provide consumers with the ability to compare currency conversion service options and costs. PSPs will need to disclose the exchange rate, the foreign exchange reference rate and the total cost that would apply to a transaction. The European Banking Authority is charged with further specifying these disclosure requirements through Regulatory Technical Standards. Those RTS will also set a transitional cap for all currency conversion charges which will apply for a transitional period between the entry into force of the RTS and the applicable date of the proposed amendments. The proposed disclosure requirements would apply to all cross-border payments, including payments in currencies other than the euro.

    Feedback on the Commission's proposals can be provided via the consultation webpage by June 12, 2018. The proposed amending Regulation has now passed to the European Parliament and Council of the European Union for consideration. The Commission anticipates that the final amending Regulation would apply from January 1, 2019.

    View the proposed amending Regulation, impact assessment and feedback form.

    View the existing Regulation on cross-border payments.