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Cross border credit transfers within the EU

04 December 2009
by Ina Dimireva -- last modified 04 December 2009

This Directive establishes minimum information and performance requirements for cross-border credit transfers so as to ensure that funds can be transferred throughout the European Union (EU) rapidly, reliably and inexpensively.

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ACT

European Parliament and Council Directive 97/5/EC of 27 January 1997 on cross-border credit transfers [Official Journal L 43 of 14.02.1997].

SUMMARY

The Directive deals with cross-border credit transfers. Legislation in this field has recently been strengthened by Regulation 2560/2001 on cross-border payments, that is, cross-border transfers, cross-border electronic payment transactions and cross-border cheques.

Scope

Directive 97/5/EC applies to transfers of up to 50 000 euros effected in the currencies of the Member States and in euros. The Directive defines a "cross-border credit transfer" as a transaction carried out on the initiative of an originator via an institution in one Member State, with a view to making funds available to a beneficiary at an institution in another Member State.

Transparency of cross-border credit transfers

Institutions must provide their customers with the following information on the arrangements for cross-border credit transfers:

  • the time needed for the funds to be credited to the account of the beneficiary's institution;
  • the time needed for the funds credited to the account of the institution to be credited to the beneficiary's account;
  • the method used to calculate any commission fees and charges payable by the customer to the institution;
  • the value date applied by the institution;
  • details of complaint and redress procedures;
  • the reference exchange rates used.

Institutions must provide the following information once a cross-border credit transfer has been effected or received:

  • a reference enabling the customer to identify the transfer;
  • the original amount of the transfer;
  • the amount of any commission fees and charges payable by the customer;
  • the value date applied by the institution.

If the originator has specified that the transfer charges are to be borne by the beneficiary, the latter must be informed of this by his own institution.

Minimum obligations on institutions

In cases of cross-border credit transfers with stated specifications, the institution must, at the customer's request, give an undertaking concerning:

  • the time needed for the transfer to be effected;
  • the commission fees and charges payable.

The originator's institution must effect the transfer within the time limit agreed with him. If the agreed time limit is not complied with, or in the absence of any such time limit, and if, at the end of the fifth bank business day following the date of acceptance of the transfer order, the funds have not been credited to the account of the beneficiary's institution, the originator's institution must provide the originator with compensation.

The beneficiary's institution must make the funds transferred available to the beneficiary within the time limit agreed with him. If the agreed time limit is not complied with, or in the absence of any such time limit, and if, at the end of the bank business day following the day on which the funds were credited to the account of the beneficiary's institution, they have still not been credited to the beneficiary's account, the beneficiary's institution must provide him with compensation.

No compensation is payable if the originator's institution can establish that the delay is attributable to the originator. The same applies if the beneficiary's institution can establish that the delay is attributable to the beneficiary.

The originator's institution, any intermediary institution and the beneficiary's institution are obliged, after the date of acceptance of the transfer order, to effect the transfer for the full amount, unless the originator has specified that the costs are to be borne by the beneficiary.

If the originator's institution or an intermediary institution has made a deduction from the amount of the transfer, the originator's institution must, at his request, credit the amount deducted to the beneficiary free of all deductions and at its own cost, unless the originator instructs it to credit the amount to him.

If failure to process the transfer order in accordance with the originator's instructions can be attributed to the beneficiary's institution, that institution must credit the beneficiary, at its own cost, with any amounts wrongly deducted.

If the originator's institution accepts a transfer order but the relevant amount is not credited to the account of the beneficiary's institution, the originator's institution must credit the originator with the amount of the order, plus interest and the transfer charges paid by him. A ceiling of 12 500 euros applies.

In the event of an intermediary institution chosen by the beneficiary's institution failing to process an order, the latter institution must credit the relevant amount to the beneficiary. A ceiling of 12 500 euros applies.

In the event of an intermediary institution chosen by the originator failing to process a transfer order, or in the event of an order not being effected because of errors or omissions in the instructions given by the originator to his institution, that institution and the other institutions involved must endeavour to refund the amount of the order.

Institutions involved in processing cross-border credit transfer orders will be released from the obligations set out in the Directive if they can show that any failure to comply with orders was due to circumstances beyond their control.

Context

The Directive follows progress made towards the completion of the single market and will help to facilitate fast, reliable and inexpensive cross-border transfers within the Community with a view to the completion of economic and monetary union. To this end it lays down standard minimum requirements as regards providing information and effecting transfers. The Directive deals only with cross-border credit transfers, while Regulation 2560/2001 relates more generally to cross-border payments.

REFERENCES

Directive 97/5/EC - 14.02.1997 - 14.08.1999 OJ L 043, 14.02.1997

RELATED ACTS

Information about the originator accompanying credit transfers.

Proposal for a Regulation of the European Parliament and the Council of 26 July 2005 on the payer accompanying transfers of funds [COM(2005) 343 final - Not published in the Official Journal].

The proposal lays down rules establishing the traceability of credit transfers that are applicable to all providers of payment services in the payment chain. The purpose of this proposal for a regulation is to transpose into Community law special recommendation VII on electronic transfers (SR VII) (FR) by the Financial Action Task Force on Money Laundering (FATF). FATF is an intergovernmental organisation that aims to design and promote, at both national and international level, strategies for combating money laundering and the financing of terrorism.

According to the proposal, providers of payment services to originators must ensure that transfers of funds are accompanied by information about the originator that is exhaustive, correct and useful. All providers of payment services to beneficiaries will be obliged to report suspicious transactions to the authority responsible for combating money laundering and the financing of terrorism.

Evaluation report

Report from the Commission to the European Parliament and to the Council of 29 November 2002 on the application of Directive 97/5/EC of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers [COM (2002) 663 - Not published in the Official Journal].

This report details the arrangements for the implementation of the Directive on cross-border transfers at national level with regard to both legal transposal into domestic law and practical application by the banking sectors in the Member States.
It emerges that:- Directive 97/5/EC was properly transposed by all the Member States. Only a few specific problems remain. In particular, some Member States have not met all the requirements of the Directive on the information to be supplied before and after transfers are made or have not duly transposed the provisions which require them to ensure adequate and effective claims and appeal procedures; - the implementing rules on cross-border transfers in the various Member States are far from being satisfactory. While the implementing deadlines are acceptable, several problems remain such as the double charging of costs, the lack of information for the client and refusal by certain credit institutions to compensate them in the event of late payment or to reimburse them for illegally deducted costs or transfers which did not arrive at their destination.
On the basis of one of the improvements in the Regulation on cross-border payments that laid down the principle of non-discrimination between transfers within a Member State and transfers between different Member States, the report lists the other improvements needed in connection with cross-border transfers. It proposes changes to the Directive with a view to improving the execution of transfers. In addition, for the sake of greater consistency and wider coverage by the legislation on payments, the report argues for the grouping of all legislative provisions on retail payments in the internal market in order to move towards a single legal instrument in the matter.

Commission Communication to the Council and the European Parliament of 31 January 2000 on retail payments in the internal market [COM (2000) 36 - Not published in the Official Journal].

The Communication urges the need for efficient, secure and inexpensive retail payment services in the internal market to accompany the introduction of the euro. The Commission advocates improvements to the infrastructure for handling these payments, which has lagged far behind domestic electronic transfer systems. It also calls for the phasing out of differences between charges for domestic and cross-border use of payment cards and greater transparency in the information provided to cardholders.