EBA charges European Commission with cross-border services mission

Written by Alex Hamilton
31st October 2019

The European Banking Authority (EBA) has published a report calling on the European Commission (EC) to increase cross-border payments activity in the European Union through the smoothing of regulatory divergence between member states.

The EU’s cross-border services are not impressing the EBA

The EBA calls the lack of cross-border activity an “urgent problem”. According to the EC’s Consumer Financial Services Action Plan, 7% of customers in 2016 used financial services from another EU country.

Developed under the EBA’s FinTech Roadmap programme, the report requests the EC facilitate better cross-border payments access via the updating of interpretative communications on the cross-border provision of services and further harmonisation of consumer protection, conduct of business and anti-money laundering (AML) / counter terrorism financing (CFT).

While the EBA report acknowledges that other factors may behind the figure, including language and financial literacy differences, it adds that “facilitating access to cross-border services by addressing issues that potentially deter firms from offering financial services in this manner can help enhance choice for consumers.”

Identifying and solving differences between EU member states will be a crucial first step, the EBA writes, but it will come with some challenges.

The first it highlights is the identification of when a digital activity is a cross-border. “Although this is a crucial element in determining which regulatory and supervisory frameworks apply, currently, competent authorities and firms lack clear guidance on how to classify cross-border activity under the freedom to provide services or right of establishment,” it writes.

Secondly, areas of EU law which aren’t harmonised yet could prove a stumbling block. The EBA identifies issues related to authorisations and licencing, consumer protection, conduct of business requirements, and AML and CFT.

“Left unaddressed these issues may impede institutions and other FinTech firms from providing banking and payments services cross-border within the EU,” the EBA states. “Therefore, the EBA recommends the European Commission take action, including the update of its interpretative communications to support the identification of cross-border services.”