Tuesday, October 10, 2006

I hate to break it to you guys, but SEPA is not a huge priority for corporates

Ok here's how it goes. The banks, the European Commission and the European Central Bank have been banging on about this thing called SEPA (the Single Euro Payments Area. I think I am suffering from SEPA fatigue.

Anyway, at the second day of the Sibos conference, Natexis Banque Populaire and Unicredit outlined how they were preparing for SEPA in terms of developing a single operating platform, the need for testing and for banks to decide whether they want to be on the manufacturing side of the business or outsource their payments business to someone else.

Then Vincent Herlicq from the French corporate treasury association AFTE took to the stage and proceeded to tell the banks, well actually we may support the concept of SEPA, but it is not a major priority for most corporates. Oh and by the way, we are not going to be ready by 2008, the start of the transition period to SEPA. In fact, it could take corporates six years to migrate to SEPA which means instead of the 2008-2010 transition period most banks had planned on, they may have to run legacy and SEPA instruments in parallel for a few years longer.

"There is no widespread coverage of SEPA within the general population," said Herlicq. "SEPA is still not a real concern. I don't know any corporate that will have a high volume of SEPA instruments in 2008. We are not ready for that."

While the banks may still be deciding how SEPA impacts their business, the corporates it seems have not even got that far. The challenge for treasurers says Herlicq is to convince the CFO to invest in the SEPA project at all and until they can do that the move to BIC (Bank Identifier Code) and IBANs (International Bank Account Numbers) is not going to carry the same sense of urgency as the banks would like, at least not for those corporates whose business is still largely domestic.

It seems the banks, in particular the European Payments Council (EPC) have done a great job at educating corporates as to why they should move to SEPA or the new payment instruments that the EPC developed rulebooks for. "The EPC rule books are too complex," said Herlicq. "We would like a more simplified version," which was met with a rather bemused grin by Gerard Hartsink, the chairman of the EPC, who earlier had reeled off an excerpt from a press release by the European Association of Corporate Treasurers as if to say, SEPA, as the banks have defined it, has corporates' blessing.

According to Herlicq, corporates also need to be convinced that the SEPA instruments are a significant improvement on the domestic payment instruments companies are currently using. Talk about project mismanagement.

Corporates could possibly be incentivised to take SEPA more seriously if the banks were more forthcoming on pricing, but the banks are being cagey on that front. Bernard Gouraud of Natexis Banque Populaire gave some explanation as to why. "How can we talk about price when banks will have to run legacy systems in parallel with SEPA instruments."

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