Feedback on Consultation Paper No.6 2010 - the Jersey Financial

FEEDBACK ON CONSULTATION PAPER NO. 6 2010 THE SINGLE EURO PAYMENTS AREA – MEETING THE ADMITTANCE CRITERIA Options for meeting the SEPA admittance criteria concerned with the regulation and supervision of payment services ISSUED NOVEMBER 2010

2 of 23 ISSUED NOVEMBER 2010

CONSULTATION FEEDBACK This paper reports on the responses received by the Jersey Financial Services Commission (the “Commission”) on Consultation Paper No. 6 2010: “The Single Euro Payments Area – Meeting the admittance criteria”. Further enquiries concerning the consultation may be directed to: Andrew Le Brun Director, International & Policy Jersey Financial Services Commission PO Box 267 14-18 Castle Street St Helier Jersey JE4 8TP Telephone: +44 (0) 1534 822065 Facsimile: +44 (0) 1534 822001 Email: [email protected] or Stephen de Gruchy Senior Manager, International & Policy Jersey Financial Services Commission PO Box 267 14-18 Castle Street St Helier Jersey JE4 8TP Telephone: +44 (0) 1534 822110 Facsimile: +44 (0) 1534 822001 Email: [email protected]

FEEDBACK ON CONSULTATION PAPER NO. 6 2010 3 of 23

Glossary of terms EEA means the European Economic Area (which consists of the 27 EU

Member States plus Iceland, Liechtenstein and Norway)

EU means the European Union

e-money means electronic money

EPC means the European Payments Council

JBA means the Jersey Bankers’ Association

payment institution means a payment service provider authorised pursuant to Title II of the PSD (and excludes banks and e-money issuers)

payment instrument means any personalised device(s) and/or set of procedures agreed between the payment service user and the payment service provider and used by the payment service user to initiate a payment order

payment service provider (or ‘provider’)

means a business that provides payment services

payment services means activities that fall within the scope of the PSD

payment transaction means an act, initiated by the payer or payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and payee

PSD means European Union Directive 2007/64/EC on payment services, commonly referred to as the “Payment Services Directive”

SEPA means the Single Euro Payments Area

the Commission means the Jersey Financial Services Commission

the Competition Law means the Competition (Jersey) Law 2005

the Consultation Paper means the Commission’s Consultation Paper No. 6 2010: “The Single Euro Payments Area – Meeting the admittance criteria”

third country means a country outside the EEA, e.g. Jersey

UK means the United Kingdom


Contents Glossary of terms.....................................................................................................................................3 Contents ....................................................................................................................................................4 1 OVERVIEW ......................................................................................................................................5

1.1 Background................................................................................................................... 5 1.2 Feedback on the proposals contained in the Consultation Paper ......................... 5 1.3 Terminology used in this Feedback Paper ............................................................... 5

2 SUMMARY OF RESPONSES .......................................................................................................7 2.1 Structure of this section............................................................................................... 7 2.2 Title II of the PSD ......................................................................................................... 7 2.3 Titles III and IV of the PSD: general comments....................................................... 8 2.4 Titles III and IV of the PSD: currency scope........................................................... 10 2.5 Titles III and IV of the PSD: geographical scope ................................................... 11 2.6 Titles III and IV of the PSD: payment services scope............................................ 12 2.7 Title II of the PSD: implementation options........................................................... 14 2.8 Titles III and IV of the PSD: implementation options........................................... 15 2.9 Other comments from the JBA................................................................................. 18

3 SUMMARY AND NEXT STEPS.................................................................................................20 3.1 Implementation - scope............................................................................................. 20 3.2 Implementation of Titles III and IV – method ....................................................... 21 3.3 Next steps.................................................................................................................... 22 3.4 SEPA: Guernsey and the Isle of Man ...................................................................... 22

APPENDIX A .........................................................................................................................................23 List of respondents. ............................................................................................................. 23


1 OVERVIEW 1.1 Background

1.1.1 The Single Euro Payments Area (the “SEPA”) is the term used to describe a block of countries, the payment service providers in which may use two payment instruments (a standardised credit transfer and a standardised direct debit) that have been developed by a body known as the European Payments Council (the “EPC”).

1.1.2 The Chief Minister’s Department is giving active consideration to the legislative, regulatory and other measures that it believes would be required in order to support a successful application to the EPC for Jersey’s membership of the SEPA.

1.1.3 Membership of the SEPA will be conditional upon an assessment by the EPC - the decision-making and coordination body for the SEPA - that the Island has met the criteria set for the admittance of ‘third countries’1 into the SEPA.

1.1.4 The purpose of Consultation Paper No. 6 2010 (the “Consultation Paper”) was to consult on options as to how the Island should meet those criteria set by the EPC concerned with the regulation and supervision of payment service providers.

1.1.5 ‘Payment services’ include services such as credit transfers, direct debits, credit card payments and ATM cash withdrawals. In the European Union (the “EU”), the primary piece of legislation governing the regulation and supervision of payment service providers is the Payment Services Directive (Directive 2007/64/EC) (the “PSD”)

1.2 Feedback on the proposals contained in the Consultation Paper 1.2.1 The Commission received one response to the Consultation Paper. This was

from the Jersey Bankers’ Association (the “JBA”).

1.2.2 A summary of the comments made by the JBA can be found in section 2 of this Feedback Paper.

1.2.3 The Commission is grateful to the JBA for taking the time to consider and comment on the Consultation Paper.

1.3 Terminology used in this Feedback Paper 1.3.1 This Feedback Paper uses a significant amount of terminology connected with

the PSD. Whilst the Glossary gives brief explanations for the terms used, more

1 i.e. a country outside the European Economic Area.


detailed information on each term can be obtained by referring back to the Consultation Paper.


2 SUMMARY OF RESPONSES 2.1 Structure of this section

2.1.1 The questions posed in the Consultation Paper and a summary of the response received to each one are presented below. The Commission’s thoughts on the response received and how the Commission intends to address the matters raised is set out in boxed text.

2.1.2 The Consultation Paper can be obtained from the Commission’s website2 or by contacting the Commission directly.

2.2 Title II of the PSD Question 5.2.8

Do you consider that:

• there is no need, at this time, to implement measures in Jersey that are “substantially equivalent” to Title II; or

• Jersey should implement measures that are “substantially equivalent” to Title II that would cover only payment services provided using a SEPA payment instrument; or

• Jersey should implement measures that are “substantially equivalent” to Title II that would cover only payment services provided using any payment instrument (i.e. SEPA or non-SEPA); or

• Jersey should implement measures that are “substantially equivalent” to Title II that would cover any payment service provided by a payment institution.

2.2.1 Title II of the PSD provides a prudential authorisation regime for payment service providers that are not banks or e-money issuers.

2.2.2 The JBA notes that the only proven demand for access to the SEPA has come from the banking industry. In the absence of demand for access to the SEPA from non-bank payment service providers, the JBA considers that there would be no need to implement measures that are “substantially equivalent” to Title II unless the EPC requires Title II to be implemented or if, in not doing so, there would be a breach of any requirements in Jersey set in relation to the prevention of barriers to fair competition.

2 http://www.jerseyfsc.org/pdf/Consultation_Paper_No_6_2010_SEPA_PSD_implementation.pdf


Commission response

2.2.3 The Commission’s expectation is that the EPC would not expect a third country to implement measures that are substantially equivalent to Title II where there is no substantive demand from non-bank entities for access to the SEPA.

2.2.4 The Commission agrees with the JBA’s assessment that the only proven demand for access to the SEPA has come from the banking industry. Despite the issue of the Consultation Paper being advertised widely, it has not elicited any response from non-bank entities.

2.2.5 The Commission has taken advice on the JBA’s point concerning fair competition. The advice received indicates that if measures that are substantially equivalent to Title II (i.e. to enable non-bank entities to access the SEPA) were not put in place there would not be a breach of the Competition (Jersey) Law 2005 (the “Competition Law”). However, if the absence of a Title II equivalent regime prevented non-banks from competing with banks in the provision of payment transactions using a SEPA payment instrument that would likely be seen as acting against the intention of the Competition Law.

2.2.6 The Commission’s conclusion is that in the absence of any demand from non-bank entities for access to the SEPA there is no compelling case to devote its limited resources to putting in place, at this time, measures that are substantially equivalent to Title II. Clearly, if substantive demand for access to the SEPA from non-bank entities were to become evident the Commission would re-consider its approach. It would also do so if there was a significant re-locating to Jersey of businesses seeking to provide payment services outside of a regulated environment.

2.3 Titles III and IV of the PSD: general comments 2.3.1 In its response, the JBA made a number of general comments about the

implementation of measures that are “substantially equivalent” to Titles III and IV which are summarised, and responded to by the Commission, in this section.

2.3.2 The JBA notes that the current “SEPA admittance criteria” published by the EPC is not explicit as to the extent to which a third country would be expected to implement measures that are substantially equivalent to Titles III and IV of the PSD.

Commission response

2.3.3 The Commission’s understanding is that the EPC would expect a third country to implement measures that are “substantially equivalent” to Titles III and IV only in respect of payment transactions using a SEPA payment instrument.


2.3.4 The JBA observes that if the Island were to fully implement Titles III and IV provisions (i.e. regulate all payment services and not just payment transactions using SEPA payment instruments) Jersey banks would be unable to enforce certain aspects of Titles III and IV against counterparty banks in the European Economic Area (the “EEA”) because the EEA bank would not be legally obliged to regard payments going to or coming from Jersey as one to/from a PSD-compliant jurisdiction (i.e. the EEA bank would not have to regard Jersey as a “leg-in” jurisdiction, to use PSD language). The JBA suggests that unless the EPC is able to give an undertaking that it would issue instructions to EEA banks to regard the Island as within the EEA for all payment transactions (whether made through the SEPA or otherwise) there would be no justification for fully implementing Titles III and IV provisions beyond SEPA payment instruments.

2.3.5 Having said that, the JBA response recognises the desirability of adopting the highest standards of consumer protection wherever possible and the importance of presenting customers with a clear and consistent service provision. For example, it considers that it would be difficult to convey why a euro payment into an EEA country via the SWIFT™ payment system was subject to different terms and conditions to those of a euro payment into an EEA country via a SEPA credit transfer.

2.3.6 The JBA is of the view that there are many aspects of Titles III and IV that the Island might readily adopt for all payment services but others where it would be inadvisable to do so because, in the absence of “leg-in” recognition (as referred to in paragraph 2.3.4), Jersey banks would have no certainty as to how EEA banks would react with regards to some aspects associated with payments to or from Jersey. The JBA opines that the United Kingdom (“UK”) has “gold-plated”3 certain aspects of the PSD when implementing it and the JBA observes that if Titles III and IV were to be implemented in Jersey covering all payment services, the JBA would wish to suggest alternative approaches in respect of certain aspects of those Titles (for non-SEPA payments). For example, the JBA considers that, in relation to the manner and timescale in which the PSD requires certain matters to be communicated to customers, the requirements of the PSD would merit altering because many customers of Jersey banks will not be local residents (unlike the situation, for example, for UK banks).

2.3.7 The JBA observes that, if such a “bespoke” approach to the implementation of Titles III and IV for non-SEPA payment services is considered, a pan-Island approach should be taken given that many Jersey banks use a single payment process across all three of the Crown Dependencies.

3 i.e. when transposing the PSD into its domestic legislation the UK set requirements that go beyond

the minimum in the PSD.


Commission response

2.3.8 The Commission’s understanding is that the EPC has no remit to issue the type of instruction referred to by the JBA in its response (see paragraph 2.3.4) although this may be an area in which the European Commission has competence.

2.3.9 The Commission welcomes the JBA’s commitment to high consumer protection and its acknowledgement that there are many aspects of Titles III and IV that the Island might readily adopt in respect of all payment services. However, the Commission recognises the difficulties that Jersey banks would face, in the absence of “leg-in” recognition of Jersey by EEA banks, if the Island were to implement measures that are substantially equivalent, in all respects, to Titles III and IV of the PSD.

2.3.10 The Commission considers that there is considerable merit in the JBA’s suggestion of a bespoke approach to the implementation of Titles III and IV for non-SEPA payment services and the suggested pan-Island approach would be a sensible way forward. However, the Commission’s view is that this should be considered a longer-term objective and should not be attempted at this time. Given the limited resources at the Commission’s disposal it considers that the priority at this time should be to focus on putting in place the measures necessary to enable Jersey banks to gain access to the SEPA.

2.4 Titles III and IV of the PSD: currency scope Question 5.4.8


• Jersey’s implementation of Titles III and IV should cover payment transactions in euro only; or

• Jersey’s implementation of Titles III and IV should cover payment transactions in the currency of any EEA country; or

• Jersey’s implementation of Titles III and IV should cover payment transactions in the currency of any SEPA country.

Please give reasons for your answer.

2.4.1 In the absence of the Island being able to secure “leg-in” recognition, as referred to in paragraph 2.3.4, the JBA is of the view that Jersey’s implementation of Titles III and IV should cover SEPA payment transactions only. All such transactions would be in carried out in euro.

2.4.2 The JBA suggests that there would be merit in considering extending implementation of Titles III and IV to sterling credit transfers or direct debits (subject to the caveat referred to in paragraph 2.3.6 about tailoring the requirements to suit the particular circumstances of the Crown Dependencies). It considers that by covering sterling payments as well as euro payments, a


more consistent and understandable message would be able to be delivered to customers of Jersey banks.

Commission response

2.4.3 Given that the PSD does not apply to Jersey, the Commission does not believe that there is any practicable method that could be used to secure “leg-in” recognition by EEA banks in respect of non-SEPA payments. In the light of this, the Commission agrees with the JBA that Jersey’s implementation of Titles III and IV should therefore be restricted to payment transactions made using a SEPA payment instrument (which would be carried out in euro only).

2.4.4 The Commission considers that there is considerable merit in the JBA’s suggestion of extending implementation of Titles III and IV to sterling credit transfers and direct debits. However, the Commission’s view is that this should be considered a longer-term objective and should not be attempted at this time. Given the limited resources at the Commission’s disposal it considers that the priority at this time should be to focus on putting in place the measures necessary to enable Jersey banks to gain access to the SEPA.

2.5 Titles III and IV of the PSD: geographical scope Question 5.5.9


• Jersey’s implementation of Titles III and IV should cover payment transactions only where the payment service providers of both payee and payer are in Jersey; or

• Jersey’s implementation of Titles III and IV should cover payment transactions only where the payment service providers of both payee and payer are in the UK Payments Area4 or the EEA; or

• Jersey’s implementation of Titles III and IV should cover payment transactions where the payment service providers of both payee and payer are in a SEPA country.


2.5.1 The JBA acknowledges that, to meet the EPC admittance criteria the Island would, as a minimum, need to introduce measures that are “substantially equivalent” to Titles III and IV in respect of payment transactions made using a SEPA payment instrument where the payment service providers of both payee and payer are in the UK Payment Area or the EEA.

4 Means an area consisting of the United Kingdom, Jersey, the Bailiwick of Guernsey and the Isle of Man.


2.5.2 However, in the interests of offering customers a more cohesive set of terms and conditions for payment services, the JBA suggests that there could be merit in considering implementing a tailored version of Titles III and IV (as referred to in paragraph 2.3.6) for sterling (non-SEPA) payment transactions (e.g. CHAPS™, BACS™, Faster Payments™) where the payment service providers of both payee and payer are in the UK Payment Area.

Commission response

2.5.3 In the interests of offering bank customers a more cohesive set of terms and conditions the Commission welcomes the JBA’s suggestion of extending a tailored version of Titles III and IV to sterling non-SEPA payment transactions where the payment service providers of both payee and payer are in the UK Payment Area.

2.5.4 However, the Commission’s view is that this should be considered a longer-term objective and should not be attempted at this time. Given the limited resources at the Commission’s disposal it considers that the priority at this time should be to focus on putting in place the measures necessary to enable Jersey banks to gain access to the SEPA. This would mean implementing measures that are “substantially equivalent” to Titles III and IV in relation to payment transactions only where the payment service providers of both payee and payer are in the UK Payment Area or the EEA.

2.6 Titles III and IV of the PSD: payment services scope Question 5.6.7


• Jersey’s implementation of Titles III and IV should cover only payment services provided using a SEPA payment instrument; or

• Jersey’s implementation of Titles III and IV should cover only payment services provided using any payment instrument (i.e. SEPA or non-SEPA); or

• Jersey’s implementation of Titles III and IV should cover all payment services.


2.6.1 In the absence of the Island being able to secure “leg-in” recognition, as referred to in paragraph 2.3.4, the JBA is of the view that, at least initially, Jersey’s implementation of Titles III and IV should cover only payment transactions made using a SEPA payment instrument.

2.6.2 However, the JBA considers that applying Titles III and IV requirements solely to SEPA payment instruments would be a difficult message to convey and lead


to some confusion, particularly for the banks’ UK and European-domiciled customers.

2.6.3 In practice, the JBA considers that most of the requirements of Title III could readily be applied to the majority of payment instruments and services given that many of its member banks will, as a consequence of close UK links, already reflect many of the Title III requirements within the terms and conditions of their specific products and services. As regards Title IV, the JBA believes that implementing it without amendment and for all payment instruments and services would not be feasible in the absence of “leg-in” recognition by EEA banks.

2.6.4 Notwithstanding this, the JBA suggests that, in the interests of addressing the issue referred to in paragraph 2.6.2, there could be merit in considering which aspects of Titles III and IV could realistically be applied to all payment services. It suggests the establishment of a Crown Dependencies’ joint industry/regulators working party to determine precisely what the approach should be. The JBA acknowledges that any proposal would need to be deemed sufficient to meet the SEPA admittance criteria set by the EPC.

Commission response

2.6.5 Given that, for the reasons referred to earlier, the Island will not be able to secure “leg-in” recognition for non-SEPA payments, the Commission supports the JBA view that, at least initially, Jersey’s implementation of Titles III and IV should cover only payment transactions made using a SEPA payment instrument.

2.6.6 The Commission acknowledges the point the JBA makes about possible customer confusion arising if Titles III and IV were to apply only to payment transactions made using a SEPA payment instrument. The Commission supports the suggestion of a pan-Island approach to considering which aspects of Titles III and IV could realistically be applied to all payment services.

2.6.7 However, the Commission’s view is that this should be considered a longer-term objective and should not be attempted at this time. Given the limited resources at the Commission’s disposal it considers that the priority at this time should be to focus on putting in place the measures necessary to enable Jersey banks to gain access to SEPA. This would mean implementing measures that are “substantially equivalent” to Titles III and IV to the extent described in paragraph 2.6.5.


2.7 Title II of the PSD: implementation options Question 6.2.7

If Jersey were to implement Title II, which of the two options do you consider should be used? Please give reasons for your answer.

2.7.1 The JBA is of the view that, if Island authorities consider it beneficial/appropriate to implement Title II, Option 1 [using the existing regulatory framework] would be the most appropriate option.

Commission response

2.7.2 The Commission welcomes the JBA’s support for Option 1, which, in the Commission’s view is the most appropriate one.

2.7.3 However, as indicated in paragraph 2.2.6, the Commission does not believe that there is a compelling case to devote its limited resources to putting in place, at this time, measures that are substantially equivalent to Title II.

Question 6.3.2

If Jersey were to implement provisions that are “substantially equivalent” to Title II, do you consider that there are other implementation options that should be considered? If so, please give details.

2.7.4 The JBA is of the view that the consultation paper set out the only practicable implementation options.

Commission response

2.7.5 The Commission notes the JBA’s response.


2.8 Titles III and IV of the PSD: implementation options Question 6.5.7

Do you consider that Option 1 [use the existing regulatory framework] should be adopted? Please give reasons for your answer.

2.8.1 The JBA considers Option 1 to be attractive, particularly as it would enable the Island to bespoke its approach to implementation and could be delivered relatively swiftly.

2.8.2 The JBA acknowledges the limitations of Option 1 with respect to the establishment and enforceability of third party liabilities and obligations: however, it commented that, in the absence of “leg-in” recognition by EEA banks for non-SEPA payments (see paragraph 2.3.4), it considers it debatable that the Island should feel compelled to legislate for some of those aspects.

2.8.3 The view of the JBA is that, subject to Option 1 being acceptable to the EPC, that option would be the most appropriate.

2.8.4 Having said that however, the JBA observes that were the Island to determine that it would be desirable for the requirements of Title IV to be applied wider than just for payment transactions made using a SEPA payment instrument – something that, in answer to earlier questions in the Consultation Paper, the JBA suggests should be considered (whilst recognising that would go beyond what is required to meet the SEPA admittance criteria) - then standalone legislation [Option 2] would seem the most appropriate way of doing that. It considers that standalone legislation would be a sensible way of clearly evidencing implementation of Title IV measures and also help to minimise any conflicts with the Financial Services (Jersey) Law 1998 or the Codes of Practice made thereunder.

Commission response

2.8.5 Although the EPC has indicated to the Commission that it is not in a position to give guidance on implementation options, the Commission believes that Option 1 would be deemed acceptable to it. Having said that, because a miscellany of methods would be used for implementation (e.g. registration conditions, Codes of Practice, standalone legislation), demonstrating that the Island has measures in place that are “substantially equivalent” to Titles III and IV would be more challenging than for Option 2.

2.8.6 Although for the reasons given earlier the Commission considers that the priority at this time should be to focus on putting in place the measures necessary to enable Jersey banks to gain access to the SEPA, the Commission supports the view of the JBA (as expressed in response to earlier questions) that there would be merit in looking at a pan-Island approach to extending a bespoke version of Titles III and IV to non-SEPA payment transactions.


2.8.7 The Commission is also supportive of the JBA’s view that the Island should consider applying Title IV requirements to more than payment transactions made using a SEPA payment instrument. The Commission also agrees with the JBA that, if such a wider scope were to be agreed, then standalone legislation [Option 2], rather than Option 1, would be the more appropriate way of doing that.

2.8.8 Having regard to all of the above factors, and the issue referred to in paragraphs 2.8.12 and 2.8.13 below, the Commission’s agrees with the JBA that it would be more appropriate to adopt Option 2 [standalone Regulations] rather than Option 1.

Question 6.6.8

Do you consider that Option 2 [standalone Regulations] should be adopted? Please give reasons for your answer.

2.8.9 The JBA acknowledges the benefits of Option 2 [standalone Regulations] as outlined in the Consultation Paper. In addition, it considers that standalone Regulations would provide a clear reference point to which bank customers and their advisors might refer.

2.8.10 The JBA recognises that, in respect of SEPA payments at least, standalone Regulations would need to apply “substantially equivalent” measures to those set by Titles III and IV of the PSD. However, its response indicates that if standalone Regulations were to apply to all payment instruments (and not just SEPA payment instruments) the JBA would be concerned if the Regulations did not modify certain elements of Titles III and IV for non-SEPA payments (for the reasons given in 2.3.6 above).

2.8.11 The JBA considers that, on balance, if the Island is to substantively adhere to the requirements of the PSD, then standalone Regulations as per Option 2 would seem to represent the most logical approach. However, it is concerned about the lead time to introduce such Regulations: the JBA suggests that the EPC be requested to consider approving transitional arrangements which would permit Jersey banks to access SEPA payment services pending the bringing into force of the Regulations.


Commission response

2.8.12 The Commission supports the JBA’s view that, on balance, if the Island is to substantively adhere to the requirements of the PSD, then standalone Regulations as per Option 2 would seem to represent the most logical approach.

2.8.13 Such “substantial adherence” will indeed have to occur (at least in respect of payment transactions made using a SEPA payment instrument) to meet the EPC’s admittance criteria for third countries. For this reason, and those articulated in 2.8.5 and 2.8.7, the Commission’s intention is to pursue Option 2.

2.8.14 The Commission considers it unlikely that the EPC would accede to the type of transitional arrangement suggested by the JBA. However, the lead-time for introducing standalone Regulations (Option 2) is unlikely to be significantly longer than for Option 1, given that the Regulations – as secondary legislation – would not require Privy Council approval.

Question 6.7.7

Do you consider that Option 3 [rely on SEPA Rulebook provision] should be adopted? Please give reasons for your answer.

2.8.15 The JBA agrees with the Commission’s assessment that it is highly unlikely that the EPC would consider Option 3 as an acceptable option.

Commission response


Question 6.8.2

Do you consider that there are other options that should be considered for implementing provisions “substantially equivalent” to Titles III and IV of the PSD? If so, please give details.

2.8.17 The JBA considers that the Consultation Paper set out all of the practicable options.

Commission response



2.9 Other comments from the JBA 2.9.1 The JBA emphasises the importance of a common approach being adopted

across all the Crown Dependencies as regards the implementation of regulatory requirements in relation to payment services. It observes that if member banks were required to accommodate island-specific variations within their operating systems and customer communications, the costs would prove prohibitive and would result in a confusing message for customers.

Commission response

2.9.2 The Commission considers the JBA’s concern to be a reasonable one. However, it should not be an issue until such time as Jersey or another Crown Dependency considers extending any of the measures in Titles III and IV to payment transactions other than those made using a SEPA payment instrument.

2.9.3 This is because when implementing the required “substantially equivalent” measures covering payment transactions made using a SEPA payment instrument, a Crown Dependency would not be able to bespoke any of the measures. If it did do so, it would likely result in the Crown Dependency failing to meet the SEPA admittance criteria. So implementation in each Island of the measures needed to meet the SEPA admittance criteria in relation to Titles III and IV should be materially the same.

2.9.4 Whilst noting that the “out-of-court” resolution requirement of Title IV was outside of the scope of the Consultation Paper, it states that it would wish to understand, in due course, how Jersey and Guernsey plan to deliver the requirement.

Commission response

2.9.5 Jersey’s Economic Development Department and Guernsey’s Commerce and Employment Department recently announced that they have agreed to a joint consultation later this year on the creation of a financial ombudsman for the Channel Islands.

2.9.6 The JBA observes that some of its members were concerned that, as a condition of Jersey admittance into the SEPA, they would be required to start using Jersey-specific IBANs (International Bank Account Numbers). The JBA describes certain practical difficulties that might arise.


Commission response

2.9.7 The Commission considers that technical matters such as the use of IBANs are a matter for the JBA and its member banks to resolve, although the practical difficulties referred to by the JBA do not, in the Commission’s view, appear insurmountable.

2.9.8 The JBA acknowledges that if the Island adopts PSD equivalent measures to any degree, its member banks would need to undertake a communication exercise to advise customers of associated changes to contractual terms and conditions and of the new consumer protection regime.

Commission response

2.9.9 The Commission welcomes the JBA’s recognition of the need for a communication exercise.


3 SUMMARY AND NEXT STEPS 3.1 Implementation - scope

3.1.1 As described in Section 2 of this Feedback Paper, the purpose of the Consultation Paper was to consider, and seek views on, what the scope of implementation of measures that are “substantially equivalent” to those of Titles II, III and IV of the PSD should be. Fundamentally, the scoping options set out in the Consultation Paper (see the table on page 11 thereof) arise as a result of considering whether Jersey should seek to do just the minimum necessary to achieve jurisdictional admittance into the SEPA or go beyond that minimum, for example, for reasons of efficiency, fairness or consumer protection.

3.1.2 In relation to Title II, the Commission’s conclusion (as described in Section 2 of this Feedback Paper) is that in the absence of any demand from non-bank entities for access to the SEPA there is no compelling case to devote its limited resources to putting in place, at this time, measures that are substantially equivalent to Title II. Clearly, if substantive demand for access to the SEPA from non-bank entities were to become evident the Commission would re-consider its approach. It would also do so if there was a significant re-locating to Jersey of businesses seeking to provide payment services outside of a regulated environment.

3.1.3 In relation to Titles III and IV, in response to the feedback received to the Consultation Paper, and for the reasons set out in Section 2 of this Feedback Paper, the Commission intends to move forward, at least initially, to implement measures that are “substantially equivalent” to those Titles to the following extent:

SCOPE OF IMPLEMENTATION

Titles III and IV Conduct of business regulation

Payment services scope

Apply Titles III and IV to payment services provided using a SEPA payment instrument

Currency scope

Apply Titles III and IV to payment transactions in euro

Geographical scope

Apply Titles III and IV where the payment service providers of both payee and payer are in the UK Payments Area5 or the EEA

3.1.4 However, in implementing measures that are “substantially equivalent” to those of Titles III and IV, the Commission would look to implement only those

5 Means an area consisting of the United Kingdom, Jersey, the Bailiwick of Guernsey and the Isle of Man.


measures that apply to payment transactions made through SEPA and not those parts of Titles III and IV that impact more generally upon the relationship between a bank and its customers. To do the latter, would, in the Commission’s view, go beyond what is necessary to meet the SEPA admittance criteria published by the EPC.

3.1.5 In the longer term, subject to resourcing constraints and appropriate consultation, the Commission will consider extending the implementation of the measures in Titles III and IV to payment services other than those provided using a SEPA payment instrument, as suggested by the JBA. The Commission’s objective would be to do so in conjunction with the competent authorities in Guernsey and the Isle of Man with the aim of ensuring a consistent pan-Island approach.

3.1.6 For practical reasons, any extension of scope is likely to be done on a ‘stepped’ basis with, in the first instance, consideration being given to extending Titles III and IV equivalent measures to sterling payments made using CHAPS™, BACS™, Faster Payments™, as suggested by the JBA (see 2.5.2). The intention would be to draft the Jersey implementing legislation (see 3.2 below) in such a way as to enable the scope of payment transactions (and other payment services) covered by it to be easily expanded over time (possibly by means of a Ministerial Order).

3.2 Implementation of Titles III and IV – method 3.2.1 As described in Section 2 of this Feedback Paper, the Consultation Paper

considered three options for implementing Titles III and IV of the PSD. In response to the feedback received to the Consultation Paper, and for the reasons set out in Section 2 of this Feedback Paper, the Commission intends to move forward on the basis of implementation Option 2.

3.2.2 Option 2 involves introducing standalone legislation which would follow, as far as is possible, the approach taken in UK legislation that implemented the PSD.

3.2.3 This standalone legislation is expected to take the form of Regulations made pursuant to the European Communities Legislation (Implementation) (Jersey) Law 1996. The Regulations will require the approval of the States of Jersey.


3.3 Next steps 3.3.1 Subject to securing law drafting time for 2011, the Commission will prepare the

necessary law drafting instructions and submit them to the Law Draftsman. Once a final draft of the Regulations is available, the Commission will, as usual in such cases, consult publicly on the draft.

3.4 SEPA: Guernsey and the Isle of Man 3.4.1 The Commission’s understanding is that the competent authorities in

Guernsey are not currently planning any work towards implementing measures that are substantially equivalent to those of Titles II, III or IV of the PSD.

3.4.2 The competent authorities in the Isle of Man are known to be preparing standalone legislation that will apply measures “substantially equivalent” to those of Titles II6, III and IV of the PSD to any firm that wishes to offer payment transactions through the SEPA (i.e. using a SEPA credit transfer or a SEPA direct debit). The conduct of business provisions of (the equivalent of) Titles III and IV are planned only to apply in respect of payment transactions made through the SEPA and not, for example, payment transactions made by CHAPS™, BACS™ or Faster Payments™, etc.

3.4.3 The Commission’s understanding is that this standalone legislation will be made under similar enabling legislation to that of Jersey’s European Communities Legislation (Implementation) (Jersey) Law 1996.

3.4.4 The competent authorities in the Isle of Man are expected to be in a position to consult on the draft standalone legislation in the early part of 2011 with a view to taking forward the legislation during the latter part of 2011, which could enable an application to be made to the EPC at that time for jurisdictional membership of the SEPA.

6 The Title II equivalent measures would not apply to banks or e-money issuers given that they are

already subject to prudential regulation in the Isle of Man.


APPENDIX A List of respondents.

• JBA

Documents

Feedback on Consultation Paper No.6 2010 - the Jersey Financial