Preparing for SEPA: Outstanding Issues
At this stage of the preparation for SEPA, three issues still require particular focus from French corporate treasurers before they are ready for implementation in 2008:
In October 2006, in its note ’12 Questions/Answers on SEPA’, the Association of French Banks (AFB) announced that BICs and IBANs would replace the current French BBAN (called RIB). This information was publicised on 27 October 2006 by the SEPA National Committee in its ‘SEPA Migration plan for France’. Surprisingly, however, on the AFB’s website (and its standardisation body CFONB) in the leaflet ‘The IBAN in Ten Questions’, we read that the ‘IBAN will not replace the BBAN’. Clearly, there is still some work to be done by the banking industry in order to obtain homogeneous and consistent communication.
Obviously, it will be difficult to get ready for migration to SEPA when the information that is communicated is incomplete as well as contradictory.
In addition, the (French) Workgroup number 3 (‘Moving from BBAN to BIC and IBAN’) from the SEPA National Committee noticed that one of the main current hurdles was that some banks only have a ‘routing BIC’ and not an ‘ISO BIC’ according to the definition in use for the SEPA project. The French banks are therefore listing these routing BICs and replacing them with ‘SEPA compliant BICs’. It is difficult to estimate the number of routing BICs, but it is reasonable to assume that a volume of 400 codes will need to be rectified out of 1,000. Of course, this refers to small banks, even financial companies, among which we are not sure which ones have emitted IBAN codes. The replacement is planned for September 2007 and it seems logical to wait for this date.
The French banks are currently discussing if they will (or won’t) authorise the French companies to compute IBAN codes from BBANs, provided that this is only for French BBAN verified by companies beforehand (control key, exact BBAN and account numbers that have been used to successfully make payments previously). The AFTE requested a validation from legal experts on the ‘legal feasibility’ of this computation by companies. For their part, SWIFT will propose an operational tool in September, which will be a table of correspondence for ‘BIC codes’ for SEPA countries (including France). It will not be about a calculation but about a declaration certified by the issuing banks of the IBAN number.
The French Clearing (SIT) is to be replaced in the last quarter 2007 by the ‘Technical System of Exchange and Treatment (the French acronym for this is STET). It is very important for French treasurers, because the SIT processes 12 billion operations a year and is at the heart of financial operations. As this clearing system is not able to handle BIC and IBAN codes, nobody envisaged its use in anything else apart from international transfers. So what about STET?
Little information has been made available on the new system at the moment. Six months before starting up, we have no idea about the eligible formats, the adequate e-banking system and the contents (BIC and IBAN, for instance) that will be used by the system.
This makes it difficult for corporates to modify their systems internally to become SEPA compliant and STET compliant at the same time. In order to avoid jeopardizing the business operations currently carried out under the ‘old’ rules, it is better not to do anything and to wait for clearer, more complete information such as what the STET will require in terms of supports, protocols and contents.
We know that X25 will gradually be abandoned and replaced by IP. As the French e-banking protocols ETEBAC (3 and 5) have been designed for X25 networks, we can expect a big change in the current local protocols in France (even if an IP version of ETEBAC5 exists but is not in use). Besides, ETEBAC e-banking protocols have no future in the new pan-European space (because they are too specifically French). From then on, what protocol will substitute ETEBAC protocols?
The companies that chose to migrate to SWIFTNet have a universal answer: adapt to the new technologies (IP), etc. But what about small and medium-sized companies? Will there be a more ‘democratic’ SWIFTNet offering? Will the market propose IP standards that are generic like the AS2 (EDI over Internet Application Statement 2)? Even there, it is difficult to take action when the standards are so badly defined.
Fortunately, and this is what allows us to remain calm, is that migration to SEPA will be managed in the long term. Companies will have until 31 December 2011 to get ready. When elements are clearly defined, it will be possible to take concrete measures for preparation. Participation in working groups, such as the national associations of corporate treasurers, as well as the accurate and timely communication of information will enable a successful migration.