Slide 21 of 26
The European Union has struggled with these issues for decades and has developed a depth of general experience that could be useful in approaching these issues not only in the banking and payments systems area, but more generally.
The different structures in the banking and financial services industry in the member states of the EU, together with their different regulatory regimes, has created a substantial impairment to the cross-border provision of services by financial institutions of one member state in other member states. The Second Banking Co-ordination Directive no. 89/646/EEC of 15 December 1989 is intended to remove such barriers to entry by providing a "passport" to banking activities. Subject to certain requirements, if a credit institution is authorized to carry on banking activities in its home state, then such institution should be allowed to carry on the same activities throughout the EU. The Directive is based on the idea of a single banking license, valid in all EU member states. Credit institutions wishing to establish a branch or to provide services in a member state other than their home state will no longer be required to obtain a separate authorization form the host state. All EU member states are supposed to have implemented the Directive by 1 January 1993.
Directive 97/5/EC, dated January 27, 1997, regulated the cross-border transfers of funds among Member States of the European Union. Member States were required to implement these regulations by adopting them into their respective national law. In view of the significant increase in the amount and value of cross-border payments made through bank transfers, the Directive, and the corresponding new laws in each Member State, aimed to create a legal framework so that both individuals and businesses may carry out their transfers inside the European Union quickly, economically and in a reliable manner. The provisions of the Directive are only applicable to transfers made in Euros or any other currency of the Member States of the EU. Significantly, the Directive sets out important consumer protection measures, including, for example, minimum requirements on information that the entities must deliver to their actual and potential customers, notice of the period of time until the funds are credited or debited, calculation methods for all costs and commissions payable by the customer, the value date applied by the entity, means available to the customer to file claims, and the exchange rates used. Such information must be presented in a manner which is easily comprehensible to the client. The WTO’s Agreement on Financial Services was completed in December of 1997 and sets out binding multilateral rules on foreign establishment and investment in the banking, securities and insurance sectors. It has not yet come into force.