A disorderly Greek exit from the Eurozone would have massive implications for Euro payment schemes across the region, never mind the economic turmoil it would cause.
A critical reason the UK’s Northern Rock crisis did not descend into chaos was because payment systems continued to operate normally and people could access their money. If the ATM network or salary payments system had failed then it is easy to imagine panic and chaos erupting on the streets.
Some Greek default commentators have suggested Greece could simply re-denominate overnight and open for business the following day. This is naively optimistic.
In-flight transactions, an inability to reach all counterparties, lead times to create new nostros accounts and urgent changes to internal Greek payment systems all combine to increase the risk of a major payments incident. When combined with an inevitable flight of money, this is a dangerous and operationally complex moment for society and bank payment teams alike.
Most banks have already made contingency arrangements to manage a total/partial break-up of the Euro, so now is the time to focus on post-changeover incident management. This is a complex task that involves co-ordinating both internal and external stakeholders and that demands good scenario planning and stress testing.
Greece is not the only worry either. Should Spain – or any other peripheral country – follow Greece out of the Euro the ramifications for bank payment systems, and the risk of some form of incident, would be even more significant Euro payments changes.
Ironically, while the entire Euro project comes under pressure as countries around the currency zone’s fringe destabilise, Brussels has introduced a new piece of harmonising and integrating Euro payments legislation. Known as the SEPA End Date Regulation, it is designed to create an integrated market for Euro electronic payments by 2014.
The new law will have far-reaching implications for the way companies, public authorities and consumers make Euro payments. Key among the changes affecting banks are:
- New and cheaper pricing – Since 1 April 2012 banks must offer the same price for a Euro credit transfer or direct debit within Europe as they do for domestic customers.
- More compliance costs – From February 2014 companies must submit payments to banks in a new technology format and standard (ISO XML20022).
- New payment schemes – Existing national Euro payment schemes will be replaced with two new harmonised systems: one for direct debits and one for credit transfers. With a few exceptions, banks and corporates must use these schemes for all Eurozone transactions from February 2014.
- Greater consumer control – From February 2014 consumers will have more control over how and when direct debits can be applied to their accounts.
- New account numbers – Everyone must use new international account number conventions by February 2016.
With many banks in the middle of their 2013 budget planning cycle, plans to accommodate SEPA End Date Regulation changes will need to be fairly mature by now.