The Single Euro Payment Area project has cleared an important hurdle but still has many more in its path.
An initial regulatory framework for the project, aimed at creating a unified payments system for the entire European Union, was officially approved last month by the E.U.'s finance ministers, and the banks developing the needed systems say they expect to be ready Jan. 1, when the first Sepa-compliant payment systems are expected to go live.
However, Harold A. Young, a managing director in New York for Deutsche Bank AG and the global head of payments products for the Frankfurt company, said that the Payments Services Directive that the finance ministers approved must now go to national legislatures.
He described the directive as the "rules of engagement" that each country will use to harmonize the regulation of cross-border transactions across the continent. The legislative process could take some time, he said.
Deutsche Bank plans to begin testing its Sepa-compliant payments systems next quarter and expects to be ready to offer electronic transactions across Europe by January, Mr. Young said. By then the company "plans to offer a full array of payments instruments, including credit transfers and direct debits."
The system is designed to enable payments to cross national boundaries in Europe without encountering economic barriers, he said. "What were formerly cross-border transactions will be treated in the same manner as domestic payments."
Ann C. Givens, a senior vice president at Wachovia Corp. and the Charlotte company's head of product management for international corporate and correspondent clients, said that even though credit transfers likely will be available by Jan. 1, it will be late 2009 or 2010 before national laws are sufficiently synchronized to make banks feel comfortable about allowing companies to debit customers' accounts.
In fact, bankers would welcome a delay on the legislative side, because it would give them more time to prepare for the new environment, Ms. Givens said.
"Everybody in the industry knew it wasn't going to happen," she said. "The banks are kind of glad. Everybody has been scrambling to figure out what they have to do."
Nancy Atkinson, a senior analyst at the Boston research and advisory firm Aite Group LLC, said that the directive approved last month covers only 12 of the 40 actions that need to be harmonized, such as settlement deadlines and time limits on returned payments.
To prepare for Sepa, U.S. banks should encourage their corporate customers to get BIC and IBAN codes for their trading partners in Europe, Ms. Atkinson said. The Bank Identifier Code and the International Bank Account Number function as the equivalent of a U.S. routing and transit number and the customer's account number.
"The world's trade is far more global than it used to be, so companies of all sizes will need to know this information," she said, and the international numbers are not necessarily the same as the routing and account numbers that European banks use domestically.
Changes in European finance are considered likely to cause a wave of bank mergers, which could make BIC and IBAN identification an ongoing hassle, she said.
Such complications could lead to the development of some kind of portable account number for European corporations, similar to the Universal Payment Identification Code developed by The Clearing House Payments Co. LLC of New York, which functions as a substitute account number for automated clearing house transactions.
