EBA欧洲银行-Public-Hearing-on-draft-RTS-on-separation-of-payment-card-schemes19-February-2016_19页_1mb

EBA Draft RTS on Separation of Payment Card Schemes and Processing Entities under the IFR

Introduction to the EBA

The European Banking Authority (EBA) was established by Regulation (EC) No. 1093/2010 and came into effect on 1 January 2011. It took over the responsibilities of the Committee of European Banking Supervisors (CEBS) and added new tasks such as consumer protection, financial innovation monitoring, and payments. The EBA is an independent authority accountable to the European Parliament and Council, with the EBA Board of Supervisors as its highest governing body, consisting of the Heads of the 28 national supervisory authorities.

The EBA has issued over 200 legal instruments and more than 100 reports since its establishment in 2011, covering various areas including payment services, payment accounts, electronic money, mortgages, personal loans, and deposits.

Mandate in the IFR

Under Article 7 of the Interchange Fee Regulation (IFR), the EBA is tasked with developing Regulatory Technical Standards (RTS) to ensure the independence of payment card schemes and processing entities in terms of:

• Accounting
• Organisation
• Decision making

The mandate does not require legal separation but emphasizes functional separation. It also does not allow for any exemptions related to three-party payment card schemes operating under a four-party model, except for Chapter II of the IFR.

Approach Followed to Deliver the Mandate

Before finalizing the draft RTS, the EBA gathered industry views through a workshop in June 2015, involving market participants such as four-party card schemes, three-party schemes, processing entities, and card standardisation bodies. Additional inputs were received from national competent authorities and other industry players not participating in the workshop.

Key points from the industry:

• Accounting independence: The EBA's approach allows for the allocation of expenses based on activity-based costing (ABC), unless directly attributable to either the scheme or the processing entity.
• Organisation and decision-making independence: Functional separation is required, with independent business units and management structures. Exemptions include shared services, development of new solutions, and the design of common rules and standards.
• Need for innovation considerations: The EBA emphasizes the importance of taking into account the development of financial innovations in its approach.

Content of the Draft RTS

Accounting Independence

• Payment card schemes and processing entities must maintain separate accounting processes to produce financial information, including balance sheets, profit and loss accounts, and explanatory notes, at least annually.
• Expenses should be allocated as follows:
  • Directly attributable to processing services → processing entity
  • Directly attributable to the payment card scheme → payment card scheme
  • Not directly attributable → activity-based costing (ABC) where practicable
  • If ABC is not applicable → documented allocation methodology
• Financial information must be reviewed by an independent auditor.

Organisation Independence

• Functional separation: Payment card schemes and processing entities must be organized in at least two separate business units with separated workspaces.
• Senior management independence: Senior management of the payment card scheme and processing entity must be distinct and act autonomously.
• Staff independence: Staff of payment card schemes and processing entities must be separate, with three exemptions:
  • Shared services
  • Development of new solutions for innovation purposes
  • Design of a single set of rules and standards for card-based transactions
• Remuneration: No cross-entities performance-based incentives for staff.
• Shared IT systems: Must ensure strict separation of access to prevent sensitive information sharing, with documentation for competent authorities.

Decision Making Independence

• Management bodies must ensure that conflicts of interest are mitigated.
• If part of the same group, they must approve and periodically review conflict of interest policies.
• If the same management body oversees both the scheme and processing entity, it must:
  • Have separate decision-making groups for each entity
  • Ensure independent reporting lines from senior management

Next Steps

• Timeline for publication: The EBA plans to publish the final RTS by the end of Q2 2016.
• Adoption and application date: The final RTS will be adopted at a later date, and the application date is to be determined (tbc).
• Interim period: From 9 June 2016, payment card schemes and processing entities must ensure independence in accounting, organisation, and decision-making processes, even before the RTS are formally adopted.
• National Competent Authorities (NCAs): NCAs are responsible for ensuring compliance with Article 7(1)(a) of the IFR during the interim period and may take into account the draft RTS. Close liaison with the Commission is encouraged to ensure consistent implementation.

Key Questions for Feedback

1. Is the activity-based costing (ABC) methodology appropriate for cost allocation, and is there a need for further clarification on account independence?
2. Are the clarifications regarding functional separation, senior management independence, and the conditions for exemptions sufficiently clear and appropriate?
3. Are the conditions for staff independence and sharing of sensitive information appropriate to maintain synergy between scheme and processing activities while ensuring a level playing field?
4. Are the conditions for decision-making independence appropriate to maintain synergy within the same legal entity or group while ensuring a level playing field?