[Dave Birch] Even if you don’t understand the intricacies of the credit crunch or the precise mechanism by which investment bankers have greatly enriched themselves while beggaring the rest of us, you must be wondering why on earth we spend so much money on regulators and regulations, directives and directors if they couldn’t prevent (or apparently even mitigate) a calamity on this scale. As Chris Skinner asks

With SEPA, the PSD and MiFID all paling into relative insignificance as the major banking markets explode globally, there are questions about whether the European plan will succeed or is even needed now

[From The FinanSer: Are Europe’s plans for Banking, MiFID and the PSD irrelevant?]

This is a very good point. If regulation serves only to hamper innovation but fails to deliver any commensurate benefits in stability of security, then what’s the point of it? Right now, it looks as if European initiatives in the finance sector have been a waste of time and money. They certainly haven’t worked as intended, either through a process of watering down (as in the case of the Single Cards Framework, the SCF) or through irrelevance in other cases. The Banker, more charitably, says that the EU is undergoing massive regulatory upheaval and while the goal of a single market in financial services may in principle be worthwhile…

As with all regulatory initiatives, not all the outcomes are exactly what the policymakers intended and The Banker has reported faithfully on a number of significant deviations. There are lessons to be learned from these failures as, no doubt, other parts of the world are planning to adapt the European model for their own uses.

[From The world can learn from EU’s regulatory shake-up mistakes – The Banker]

Still, as The Banker notes, we should take comfort from the fact that some scraps of usefulness might accidentally be left behind as many regulatory initiatives are swept away, saying that

Some of it will eventually come out right and Europe will be left with a half-fixed system.

[From The world can learn from EU’s regulatory shake-up mistakes – The Banker]

Frankly, given the costs of SEPA et al (which are several billions of euros), I think we ought to expect a little more than an almost coincidentally “half-fixed” system. When it comes to payment systems, I’m certain that a further separation between banking and payments is a way to move forward. It’s a combination of inactivity and accident that has led to payments being regulated, managed and delivered within banking and the goals of initiatives such as the Payment Services Directive are hardly coincident with the goals of banks

I went along to the excellent Financial Services Club dinner with Charlie McCreavy, the Irish EU Commissioner for the Single Market. He was going to talk about progress on the Markets in Financial Instruments Directive (MiFID), the Single European Payments Area (SEPA) and the Payment Services Directive (PSD). I’m that boring that I was actually looking forward to this, and was slightly disappointed when he decided not to deliver his intended speech but instead talk about the current financial crisis. This was a shame, because I was looking forward to the Q&A as I wanted to ask him about this part of his prepared speech:

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.

[From The FinanSer]

FPS is, of course, unrelated to SEPA and in the SEPA zone there is no equivalent of FPS, so it is not clear to me at all that these things are related. If countries in the eurozone wanted the equivalent of FPS then they could build it and it doesn’t really matter what the Commission thinks. The major European ACHs — GSIT, Vocalink, Iberpay, Equens and SIA-SSB — could easily interconnect a euro FPS if they wanted to and the reason that they don’t is presumably either because there’s no market demand for it or there’s no way for them to make money from it, not because they lack enough regulation.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


  1. Single European market could be the goal of regulators, but the latest crunch showed us again that the more integrated/linked/one system you have the harder you will be hit by a disaster. Maybe, not a single but much more harmonized payments market could be more efficient and safe – keeping (most of the process) locally as it is now.

  2. “the more integrated/linked/one system you have the harder you will be hit by a disaster.”
    I’m beginning to think that this will be one of the key lessons to come out of the current financial turmoil. We need more currencies, more money issuers, more banks and more payment systems.

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