REPORT ON ACTIVITIES 2010 Practitioners creating Europe ... · level) and • the ongoing debate around the SEPA migration end-date legislation With the support of the Future Development

REPORT ON ACTIVITIES 2010

Practitioners creating Europe-wide payment infrastructures

March 2011

© 2011 EBA CLEARING. All rights reserved

Concept and textEBA CLEARING 40 rue de CourcellesF-75008 Paris

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REPORT ON ACTIVITIES 2010

EBA CLEARING

Overview 2010

EURO1 Service

STEP1 Service

STEP2 Platform STEP2 XCT ServiceSTEP2 ICT ServiceSTEP2 SCT ServiceSTEP2 SDD Core and B2B Services

EBA CLEARING solutions have many face(t)s

New service initiatives

System performance, maintenance and enhancements

Customer support

Outlook 2011

Board Committees, User Advisory Groups and Working Groups

The Board

The Management

Country Representatives

Offices

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5

6

10

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24

25

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EBA CLEARING4 REPORT ON ACTIVITIES 2010

EBA CLEARINGCost-saving infrastructure solutions for an integrated euro payments environment

EBA CLEARING is a bank-owned infrastructure so-lutions provider. Established in 1998 by 52 banks, the Company had 67 shareholders by March 2011. Themission of EBA CLEARING is to offer solutions in the co-operative space that generate savings within its user banks.

EBA CLEARING is the leading private sector pro-vider of Europe-wide clearing and settlement servi-ces in euro. It owns and operates EURO1, a clearing and settlement system for financial and commercial payments, and STEP1, a single payment system for small and medium-sized banks, as well as STEP2, the Pan-European Automated Clearing House (PE-ACH) for mass payments in euro. By March 2011, 305 banks across Europe were directly connected to the services offered by EBA CLEARING as partici-pants or sub-participants.

Through regular user group meetings as well as infor-mation and training sessions, both at European and country level, EBA CLEARING entertains a direct and intensive exchange with its user community. This user-centred approach has forged the Company’s unique market responsiveness as a co-operative and country-neutral undertaking in a fast changing envi-ronment.

In co-operation with the Euro Banking Association, EBA CLEARING takes an important part in the bank-ing industry’s efforts to create, maintain and evolve an integrated pan-European payments environment meeting the needs of the banks and their customers in the Single Euro Payments Area (SEPA).

EBA CLEARING 5REPORT ON ACTIVITIES 2010

Overview 2010

Over the past year, EBA CLEARING successfully af-firmed its role as an infrastructure solutions provider for the pan-European payments industry.

In order to offer its users the most effective solutions, the Company worked on further expanding the reach of its services, implementing new or improved func-tionalities and developing future offerings and en-hancements.

In the second half of the year, EBA CLEARING added more milestones to its impeccable track record in de-livering major pan-European infrastructure projects. Through an extensive joining exercise involving over 1,000 banks, EBA CLEARING supported the industry in complying with the requirement of becoming reach-able for pan-European direct debits by 1st November 2010. This date also witnessed the successful up-grade of the STEP2 SEPA Services to new versions of the EPC Scheme Rulebooks and ISO 20022 XML standard. The launch of the November release was preceded by considerable implementation and test-ing activities carried out in close co-operation with the user banks.

The EURO1 platform saw a number of enhancements in 2010 and early 2011 as well. The service now fea-tures a faster end-of-day settlement pro cess and an intra-day liquidity distribution rate of 98 percent.

Furthermore, the Company launched an in-depth EURO1 review and reform program to reposition and evolve the service in the face of changing user needs and regulatory requirements.

EBA CLEARING also intensified its efforts geared at further strengthening the operational robustness and legal soundness of its service offerings. The Compa-ny created a dedicated organisational unit for Busi-ness Continuity Management and increased its re-sourcing for legal compliance work.

In line with its not-for-profit approach, EBA CLEARING reimbursed those STEP2 SDD Participants that had joined the Core or B2B Service in 2009 for a part of the 2010 fixed fees, given that actual usage cost stayed far below the level anticipated in 2009.

In more than one way, the Company also moved to-wards new horizons in the past year. In terms of new initiatives, EBA CLEARING started to look into devel-oping an e-service solution. In geographical terms, the Company moved into new headquarters at the end of 2010. EBA CLEARING’s new Paris office is located at 40 rue de Courcelles. From its new headquarters, the Company continues to foster its co-operation with user banks and technology partners as well as with other key industry players and stakeholders.


KEy fACTS ANd fIGURES (status: March 2011)

fUNCTION RTGS-equivalent clearing and settlement system on a multilateral net basis for single payments of high priority and urgency, and primarily of large amount

LIvE dATE 4th January 1999

TEChNICAL OPERATOR SWIFT

AvERAGE dAILy vOLUME 219,069 transactions

AvERAGE dAILy vALUE EUR 230 billion

LEGAL BASIS • Single Obligation Structure certified by every EU jurisdiction and juris-

dictions outside the EU where participants have Head Offices• Fully compliant with the 6 Lamfalussy criteria for netting systems• Fully compliant with the 10 Core Principles for Systemically Important

Payment Systems (SIPS) • Overseen by the European Central Bank

PARTICIPATION 67 Participants / 58 Sub-Participants

REACh 30,000+ BICs reachable via EURO1/STEP1 Participants as listed in EURO1/STEP1 Directory

ENd-Of-dAy SETTLEMENT in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2010/2011 • Significant acceleration of the end-of-day settlement process through

migration to ASI4 in June 2010• OTP Bank included as first EURO1 Bank from Central Europe in

December 2010

EURO1 Service


Providing liquidity efficiency to banks in a changing environmentFor the major payment banks in Europe, the EURO1 Service has lost none of its sparkle after a dozen years of operation, as was demonstrated by the vol-ume and participant evolution of the service in 2010. Notwithstanding the continued popularity of the plat-form, EBA CLEARING put in place the foundations for a comprehensive EURO1 review and reform pro-gram over the past year. A first set of deliverables was already implemented in the system in the first half of 2011. The aim of this reform program is to en-sure that the flagship of the Company will maintain its leading position in the face of increasing regulatory pressure and changing industry requirements.

from recovery to expansion: volumes and participation numbers in EURO1After the industry-wide volume decrease in large-value payments in 2009 due to the financial crisis, EURO1 witnessed a steady recovery in 2010 in terms of average daily volumes sent, which resulted in an increase of almost three percent compared to 2009. The daily average value continued to be around the EUR 240 billion mark throughout the year.

December 2010 saw the connection of OTP Bank, the first bank from Central and Eastern Europe joining the system, which brought the total number of direct participants to 67. The numbers of sub-participants remained stable at 58, with withdrawals from the service being offset by new connections.

Increase of EURO1/STEP1 reach to 30,000 BICs across the worldThe EURO1/STEP1 Directory attracted another 5,000 BICs over the past year, which further broadened the


reach of the services: in March 2011, over 30,000 BICs were addressable via EURO1/STEP1 Participants or Sub-Participants. In order to enhance the functional-ity of the EURO1/STEP1 Directory and to support the banks in maximising their benefits using it, a working group was initiated in 2010. The group has started analysing how to encourage participants to further in-tegrate the Directory in their internal processes and applications.

Significant acceleration of the end-of-day settlement processTogether with its participant banks and its technology partner SWIFT, EBA CLEARING continued to evolve the arrangements around the EURO1 platform in line with industry needs and regulatory requirements. On 7th June 2010, the EURO1 settlement arrangements in TARGET2 successfully moved from the Payments Module to the Ancillary System Interface (ASI4). Through this move, EBA CLEARING and the EURO1 community completed the second stage of the sys-tem’s migration to TARGET2, which had started in 2008.

As a result, the end-of-day settlement process in EURO1 was shortened by more than 25 minutes on average. Effectively, the settlement now takes place within two minutes, allowing banks to collect their liquidity from the system much earlier than before. Under the new arrangements, EBA CLEARING in-structs for the participants’ accounts to be debited di-rectly in TARGET2 – this “automation” of the end-of-day settlement process has virtually eliminated the operational risk related to this process.


Another much appreciated change came as part of the implementation of the SWIFT Technical Release 11.0: the release included the move from the US op-erational site to the new second SWIFT operational site in Switzerland and thus met the European bank-ing industry’s wish to maintain all their payments- related data within the European Union.

Kicking off a EURO1 reform programEBA CLEARING decided to launch a EURO1 review and reform program to optimally position and evolve the platform in the face of three fundamental pres-sures working on high-value single payment systems: • the requirement of better liquidity usage bearing

down on banks • the need for stronger risk controls in the light of the

ongoing crises (at industry, national and currency level) and

• the ongoing debate around the SEPA migration end-date legislation

With the support of the Future Development Group (FDG), which was newly created in 2010, the Com-pany will strive to ensure that the EURO1 set-up con-tinues to meet the users’ needs in terms of liquidity efficiency and risk control. A EURO1 simulator was developed by EBA CLEARING in order to model the proposed changes and to make sure that there is no negative impact on the system.

Bringing up liquidity distribution to 98 percentEBA CLEARING implemented a first set of mea-sures geared at further improving the EURO1 Banks’ liquidity recycling capacity in 2011. On 2nd May 2011, two additional liquidity distribution windows were in-troduced during the day at 11:00 and 12:00 CET, bringing the number of EURO1 liquidity distributions throughout the day to six.

At the same time, EBA CLEARING changed the cal-culation as to how EURO1 Participants with a long credit position can be eligible to receive a liquidity distribution; the algorithm was adjusted to apply to those banks that are up to 40 percent of their credit cap, as opposed to the previous 60 percent. Both en-hancements have further optimised the efficiency of liquidity distributions in EURO1. Almost 98 percent of the pre-funded amounts paid in by the EURO1 Par-ticipants are now distributed each day.

More enhancements to followFor the second half of 2011, a number of additional enhancements are in the pipeline. One of the lessons learnt from the crisis, for instance, was that banks should be provided with more control over the grant-ing of the bilateral credit lines in EURO1, so that they will be able to better manage their credit risk. EBA CLEARING will therefore take the necessary steps to enable banks to change their discretionary bilateral credit lines up until 07:00 CET on Day D as opposed to the current arrangement of up to 18:00 CET on Day D-1. This will enable banks to react to deterio-rating events that occur overnight, over a weekend or over a bank holiday in a timely manner. It is foreseen to implement these changes later this year, once the formal approval has been received by the Overseer.

As a result of the EURO1 review and reform program that started in late 2010, more substantial changes to the service platform and arrangements, in particular with regard to counterparty risk, are expected to be implemented in the following years.

EURO1: average daily volume of payments processed

200,000

300,000

100,000

2008 2009 2010 20110


STEP1 Service


fUNCTION Payment service for individual commercial payments in euro of high priority and urgency, complementary to EURO1 and geared towards small and medium-sized banks

LIvE dATE 21st November 2000

TEChNICAL OPERATOR SWIFT


AvERAGE dAILy vALUE EUR 1.6 billion

LEGAL BASIS STEP1 benefits from the solid legal framework underpinning of EURO1

PARTICIPATION 94 Participants / 46 Sub-Participants

REACh 30,000+ BICs reachable directly or indirectly via EURO1/STEP1 Participants, as listed in EURO1/STEP1 Directory

SETTLEMENT A STEP1 Participant settles with a EURO1 Bank of its choice

SPECIAL fACTS OR fEATURES IN 2010/2011 Bank of New York Mellon, Frankfurt Branch, connected to STEP1 as new participant in March 2011.

Participation in STEP1 (as of March 2011)

STEP1 Participants

STEP1 Sub-Participants

94

46


The service of choice for banks with a limited single euro payments business In 2010, STEP1 celebrated its 10th anniversary. The service continued to provide to its community of me-dium-sized and smaller banks a simple, direct and in-expensive access to single payment processing for commercial transactions. STEP1 enables these very cost-conscious banks to play an active role in the pan-European area as it allows them to directly exchange payments with each other and with the EURO1 Par-ticipants. At the same time, the large STEP1 commu-nity vitally contributes to broadening the reach of the EURO1/STEP1 system.

New STEP1 Participants in 2011In March 2011, BNY Mellon successfully connected to the STEP1 system from its Frankfurt office, testifying to the continued attractiveness of the service. Further-more, Kookmin Bank International Ltd. started its join-ing and testing preparations and is scheduled to con-nect to STEP1 in June 2011 from its London office.

Overall, the number of STEP1 Participants and Sub-Participants slightly decreased in 2010 and early 2011, mainly due to mergers and other market con-solidation processes. The daily average volume fig-ures of STEP1 were also affected by this evolution in 2010; however, the majority of these volumes re-

mained within the EURO1/STEP1 system, since a number of the banks left STEP1 to become EURO1 Sub-Participants. In the first quarter of 2011, the ser-vice experienced a four percent increase in volumes. By April 2011, the average daily traffic passed the 20,000 mark.

Enhanced reach of EURO1/STEP1STEP1 Banks were able to take advantage of the broadened reach of EURO1/STEP1: by end of March 2011, over 30,000 BICs were listed in the EURO1/STEP1 Directory and thus directly and indirectly reach-able via the two services. In the near future, STEP1 Participants will benefit from the working group that was established in 2010 to assess where the EURO1/STEP1 Directory procedures could be enhanced to further expand the reach for all EURO1 and STEP1 Participants and Sub-Participants.

In 2011, EBA CLEARING will also continue to evalu-ate possible enhancements that could be brought to the STEP1 Service. The aim is to ensure that STEP1 will remain the service of choice for smaller and me-dium-sized banks that want to process single euro payments at a cross-border as well as at a domestic level.


STEP2 Platform


fUNCTION Pan-European Automated Clearing House (PE-ACH) platform for processing euro retail payments

LAUNCh 28th April 2003

TEChNICAL OPERATOR SIA

AvERAGE dAILy vOLUME 2,852,854 transactions

LEGAL BASIS• Fully compliant with the 6 Core Principles applying to Prominently

Important Retails Payment Systems (PIRPS)• Fully compliant with the Pan-European ACH (PE-ACH) requirements of the European Payments Council• Overseen by the European Central Bank

SPECIAL fACTS OR fEATURES IN 2010/2011 Considerable volume increase: the overall STEP2 volumes grew by 51 percent from March 2010 to March 2011

STEP2 Services average daily volume 2008–2011

2m

2,5m

1,5m

1m2008 2009 2010 2011

3m


The PE-ACh with the reach for SEPA STEP2 confirmed its position as a key SEPA infra-structure in 2010, increasing participation numbers and transaction volumes. Both leaped ahead during the fourth quarter 2010 and processing volumes have continued their spectacular increase in 2011.

Average daily volumes rise by 1 million within one yearThe industry’s progress in its migration to SEPA picked up steam in late 2010, which directly translat-ed into a volume rise at the level of the PE-ACH: • SEPA volumes tripled, from half a million to 1.5 mil-

lion per day• In April 2011, the system broke the mark of 3 million

credit transfers processed per day

As SEPA migration is still less than 20 percent, vol-ume growth will continue as more and more national communities and individual banks are starting to move transaction volumes from legacy systems to SEPA infrastructures.

Orchestrating major joining and testing processesAs the largest payment system in Europe in terms of participation, STEP2 played a crucial role in helping European banks meet the mandatory requirement of becoming reachable for SEPA Direct Debits by November 2010:• More than 1,000 additional financial institutions

connected to one or both STEP2 SDD Services on 1st November

• Over 3,500 banks in total were reachable via STEP2 SDD following the November joining window

In parallel to these extensive joining activities, EBA CLEARING orchestrated a major testing exercise for the STEP2 SEPA Services November Release. The release covered the upgrade of the ISO 20022 XML standard and of the EPC Scheme Rulebooks. Over-all, 124 banks from 22 European countries and three different time zones participated in the testing activi-ties for the changeover to the new release. They add-ed another milestone to EBA CLEARING’s outstand-ing track record of successfully coordinating major industry projects at a pan-European level.



Preparing the ground for full SEPAThroughout 2010, EBA CLEARING intensified its co-operation with its user banks and other infrastructure providers to ensure that the industry will be able to fully reap the benefits of the PE-ACH in SEPA. This was in line with the Company’s objectives to:• offer to the banks cost-effective and resilient SCT and

SDD Services with full SEPA reach and based on a country-neutral governance model

• ensure that its STEP2 Services support the banks in providing their customers with service levels that match or even exceed their current domestic ser vice levels

• assist domestic communities in adjusting their work flows to the SEPA requirements in a flexible and time-ly manner

EBA CLEARING took important steps in 2010 towards achieving these objectives:• A joint STEP2 SEPA Business Working Group was

established in early 2010. It provides users with a forum for discussing SEPA Services-related devel-opments and issues. Once the SEPA migration has reached a critical mass, this interim user forum will give way to a more formally defined user say body

• In co-operation with the SEPA BWG, EBA CLEARING continued its work on evolving the functionalities

around its SEPA Services. As a key enhancement in 2010, the Company paved the way towards the im-plementation of additional settlement cycles in the STEP2 SEPA Credit Transfer Service

• EBA CLEARING implemented new Additional Option-al Services (AOS) on the STEP2 platform in 2010. The Company also continued to contribute to the banks’ efforts geared at harmonising AOS require-ments across communities where possible

• In October 2010, the Irish banking community and EBA CLEARING agreed on the development of a dedicated STEP2 Service for processing the Irish legacy credit transfers and direct debits via bilateral file exchange. This move to the PE-ACH is planned to take place in September 2011 and will facilitate the Irish banks’ flexible migration to SEPA. It will fur-ther enable them to offer better service levels to their customers and improve their liquidity and risk man-agement

• In order to complete the SEPA reach of STEP2, EBA CLEARING put in place links to other SEPA Scheme-compliant Clearing and Settlement Mecha-nisms (CSMs), allowing participants in such CSMs to send and receive SEPA payments to and from the PE-ACH. By the end of 2010, links with 14 CSMs across Europe had been activated

From a technical and resilience point of view, EBA CLEARING and its technology partner SIA are well-prepared to accommodate for the needs of the STEP2 users in SEPA. Thanks to its state-of-the-art technol-ogy and scalability, STEP2 is ready to take on board up to 50 million payments a day. The platform is thus prepared to absorb a major chunk of the large volumes that will migrate to the SEPA formats over the next few years.

In terms of functionality, the Company will continue to adjust the STEP2 platform to the evolving needs and expectations of its user community.

For more details on the evolution of the different STEP2 Services in 2010, please consult the following pages.



fUNCTION Payment service processing retail payments governed by the Convention on Credit Transfers in Euro, i.e. payments of up to EUR 50,000 carrying a BIC and IBAN and sent between banks in the European Economic Area (EEA)

LIvE dATE 28th April 2003


AvERAGE dAILy vALUE EUR 753 million

PARTICIPATION 102 Direct Participants / 1,671 Indirect Participants

SETTLEMENT in the EURO1/STEP1 system

REACh Full reach in 18 out of 30 countries, with close to 260 banks reach-able in those countries where there is no entry point arrangement in place that ensures full reach

SPECIAL fACTS OR fEATURES IN 2010/2011 Closedown of the service scheduled for 5th December 2011

very slow usage decrease in 2010The STEP2 XCT Service registered business as usu-al in 2010: volume figures and participation numbers remained relatively stable in spite of the ongoing mi-gration of euro retail payment flows to SCT formats and infrastructures. In the second half of the year, av-erage daily volumes slowly dropped by about 25,000 transactions.

Service closedown on 5th December 2011 Based on an in-depth consultation process with STEP2 XCT users, EBA CLEARING agreed in early 2011 to close down the first pan-European service for euro retail payments before the end of the year. This decision responded to concerns voiced by a major-ity of the Entry Points that they would not be able to comply with the D+1 delivery times stipulated in the Payment Services Directive from 1st January 2012.

A detailed analysis of the STEP2 XCT payment traf-fic showed that 97.5 percent of all XCT transactions could be migrated to SCT. The remaining payments either relate to banks that have not yet adhered to the SCT Scheme or to banks that are reachable via STEP2 SCT but for which certain BICs have not been registered. EBA CLEARING has stepped up its ef-forts to ensure that all STEP2 XCT transactions can be migrated to STEP2 SCT by December 2011.

STEP2 XCT Service



fUNCTION Euro retail payment service for Italian domestic credit transfers designed to facilitate the progressive migration of these payment flows to SEPA

LIvE dATE 24th November 2006


PARTICIPATION 6 Direct Participants / 69 Indirect Participants

SETTLEMENT in the EURO1/STEP1 system

SPECIAL fACTS OR fEATURES IN 2010/2011 Volume rise of 4.2 percent in 2010

Stable activities in 2010The STEP2 Italian Credit Transfer (ICT) Service did not witness any significant changes in processing ac-tivity over the past year. Volumes rose by 4.2 percent in 2010 and declined to a similar extent in early 2011. There was no change to the number of participants.

At the STEP2 ICT User Group meeting in February 2011, one of the participants advised the other ser-vice users that during 2011 its ICT volumes will com-pletely migrate to STEP2 SCT; this was the first an-nouncement of a full migration to STEP2 SCT issued by a STEP2 ICT user.

STEP2 ICT Service



fUNCTION PE-ACH service for processing SEPA Credit Transfers

LIvE dATE 28th January 2008


AvERAGE dAILy vALUE EUR 5.1 billion

LEGAL BASISCompliant with the SEPA Credit Transfer Scheme Rulebook and Implementation Guidelines of the European Payments Council (EPC)


SETTLEMENT Positions provided by Multilateral Netting Module are settled in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2010/2011 • Full reachability among banks in SEPA having signed the

EPC SCT Adherence Agreement• Considerable volume growth in late 2010, including

single day volume record: 5,249,914 transactions settled on 9th December 2010

A service in acceleration modeTransaction numbers in the STEP2 SEPA Credit Transfer (SCT) Service started to significantly take off towards the end of 2010: by December, average daily volumes had doubled compared to the figures in the second quarter of the year. This major increase of traffic sent through the only SCT service with full SEPA reach has continued in 2011 with April volumes almost tripling compared to April 2010.

Banks have started to take advantage of the opportu-nities that STEP2 SCT offers in several ways:• Multi-national banks are withdrawing from mem-

bership in many local systems and concentrating flows in one channel

• Participants in local markets are using STEP2 for large national SEPA payroll and pension files, for competitive reasons

• National communities have decided to phase out their legacy systems and migrate to STEP2 SCT – the service has already replaced or is in the pro-cess of replacing the national clearing systems in Luxembourg, Finland, Ireland and Italy

STEP2 SCT Service


These trends have led to a steep and steady rise of domestic transactions being channelled through STEP2 SCT. By March 2011, 97 percent of the trans-actions sent by Finnish, 82 percent by Italian, 71 per-cent by French and 67 percent by Luxembourgish and Spanish BICs were of domestic nature. At the same time, EBA CLEARING’s efforts to further reduce re-jection rates paid off, with rates falling from one rejec-tion for every 10,000 transactions sent in January to one rejection for every 27,000 transactions sent dur-ing March 2011.

Accommodating domestic volume migrationEBA CLEARING delivered a number of new features and enhancements in STEP2 SCT geared at opti-mally assisting national communities and individual banks on their migration path to SEPA: • In March 2010, STEP2 SCT was enhanced to vali-

date payments in real-time, even when the system is in a settlement phase. This allows STEP2 SCT to match the best service levels that are offered in Eu-rope for national payments. Communities are now in a position to request the introduction of optional intra-day settlement cycles fitting their local needs, beyond the additional settlement cycles that will be implemented in Q1 2012 for all STEP2 SCT users.

• In November 2010, EBA CLEARING implement-ed a change to support account number transfer-ability, an Additional Optional Service used by the community of participants in Italy. The need for fur-ther AOS geared at managing account numbers and account number changes following mergers/demergers or customers moving banks is being in-vestigated in co-operation with the user community.

• A bilateral file exchange solution is under develop-ment for the Irish banking community, which will use this functionality as part of a dedicated STEP2 Irish Service from September 2011 on.

• The Company is currently working with the SEE-BACH community of Nordic banks on solutions to strengthen the night-time settlement cycle.

EBA CLEARING will continue its consultation proc-ess with STEP2 SCT users to properly adjust the service to their changing needs during the accelerat-ing SEPA migration process. For 2012, the Company plans to introduce a lower transaction fee for large-volume SCT files sent to STEP2 that fulfil certain cri-teria allowing more efficient and cheaper processing of these files.

fragmented payments environment

Different national schemes, standards, business practices and legal frameworks

Parallel processing environments for national and cross-border retail payments

Pre-SEPA environment

Integrated payments environment

Same schemes, standards, business practices across EEA and Switzerland

Harmonised legal environment

All intra-European euro credit transfers, direct debits and card payments are domestic payments

SEPASingle Euro Payments Area



fUNCTION PE-ACH service for processing SEPA Core Direct Debits

LIvE dATE 2nd November 2009

LEGAL BASIS Compliant with the SEPA Core Direct Debit Scheme Rulebook and Implementation Guidelines of the European Payments Council (EPC)


SETTLEMENT Positions provided by Multilateral Netting Module are settled in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2010/2011 34 additional Direct Participants connected to STEP2 SDD Core in November 2010, extending reach to another 1,129 banks


fUNCTION PE-ACH service for processing SEPA Business- to-Business (B2B) Direct Debits

LIvE dATE 2nd November 2009

LEGAL BASIS Compliant with the SEPA B2B Direct Debit Scheme Rulebook and Implementation Guidelines of the European Payments Council (EPC)


SETTLEMENT Positions provided by Multilateral Netting Module are settled in TARGET2 via Ancillary System Inter-face (ASI)

SPECIAL fACTS OR fEATURES IN 2010/2011 23 additional Direct Participants connected to STEP2 SDD B2B in November 2010, extending reach to another 842 banks

4,670 financial institutions are reachable through one or more of the

STEP2 SEPA Services

STEP2 SDD Core Service

STEP2 SDD B2B Service


Services in ramp-up modeParticipant figures for the STEP2 SEPA Direct Debit Services experienced a major boost in November 2010 when EC Regulation 924/2009 made it manda-tory for EU banks offering national direct debits in euro to become reachable for cross-border direct debits in euro. With the support of its technology partner SIA, EBA CLEARING conducted the major administrative and operational processes needed to successfully deliver this joining exercise. By 1st November, an ad-ditional 1,129 financial institutions became reachable via the STEP2 SDD Core Service.

In 2011, EBA CLEARING has further intensified its ef-forts aimed at completing the reach of its STEP2 SDD Services, which currently stands at over 90 percent. Together with its user community, the Company also started to look into the development of AOS aroundthe handling of direct debit mandates. EBA CLEARINGstands ready to deliver additional features or services for the benefit of its banks.


EBA CLEARING solutions have many face(t)s

Fifty-nine professionals from 14 countries contribute on a daily basis to

the development, maintenance and

enhancement of the

EBA CLEARING Services.

They drive and shape the Company’s activities in close co-operation with 152 bank representatives on the Board, the Committees, the

UAGs and Working Groups

and in an open consultation process with the wider user community.

It is this unique combination of minds that constitutes the success of EBA CLEARING and

the value the Company delivers to the industry.



In early 2011, EBA CLEARING started to examine various options and models for creating a pan-Euro-pean e-authorisation service. This new work strand ties in with the Company’s mission to create value and generate cost savings for its user banks in the co-operative space at pan-European level.

With e-commerce growing strongly across Europe, the need for efficient and secure payment methods over the Internet has considerably increased. In this context, there has been a call for effective pan- European solutions by key stakeholders as well as by the European Commission and the European Central Bank. Based on its impressive track record in deliv-ering pan-European projects, EBA CLEARING feels that it would be well-placed to deliver the cornerstone for the new pan-European payments infrastructure that its banks will need in order to roll out the benefits of e-SEPA to their customers.

The focus of EBA CLEARING’s activities in the e-ser-vices area will be to create a secure, web-based, real-time solution that allows buyers to buy goods and services from online sellers in a secured manner. Specifically, the Company plans to develop and pro-mote a solution that will enable a buyer and a seller, who may have never met each other, to exchange trusted e-mandates and trusted payment orders through their online banking portals.

In the first half of 2011, the Company delivered a blue-print document as a basis for a consultation process with its shareholder community, other banks and rep-resentative stakeholders amongst the e-merchants and consumer communities.

The objective is to have a live service, at least for a pilot community, in place in summer 2012.

New service initiatives


System performance, maintenance and enhancements

EBA CLEARING continuously manages, monitors and controls the payment processing and settlement pro-cesses of its services. Their overall performance continued to be excellent: the availability of EURO1, STEP1 and STEP2 stood at 100 percent throughout the full year of 2010 and the first quarter of 2011.

In June 2010, the Company successfully completed all relevant user acceptance tests for the migration of the EURO1 end-of-day settlement from the Payments Module to the Ancillary System Interface (ASI4) in TARGET2. The move to the new settlement engine considerably accelerated the average EURO1 end-of-day settlement completion time, bringing it up to 16:06 CET for 2010.

The steep traffic increase in STEP2 in late 2010 and early 2011 had no impact on the processing speed of the platform.

Crisis management and contingency procedures EBA CLEARING continues to successfully test the end-of-day settlement contingency procedures in or-der to ensure high levels of business continuity in re-lation to the EURO1 end-of-day settlement. In the be-ginning of 2011, EBA CLEARING in co-operation with the European Central Bank prepared a time sched-ule for new sets of tests for all EURO1 Participants. These settlement exercises are performed on a regu-lar basis in line with the requirements of EBA CLEAR-ING’s Audit and Finance Committee. In preparation of the migration to ASI4, several contingency arrange-ment exercises were also conducted in co-operation with the ECB.

EBA CLEARING continues to participate in the regu-lar business resilience community testing organised by SWIFT as well as in other tests at industry level.

In November 2010, the Company successfully took part in a major crisis simulation exercise organised by the “Place financière de Paris”, which involved 15 fi-nancial institutions and infrastructure providers. The Company took advantage of this exercise to put its new operations centre in Paris to its first full-scale

test and to roll out its internal crisis management and business continuity arrangements. The results of this test were very satisfactory.

EBA CLEARING’s own crisis simulation exercise was carried out on 29th January 2011 with 43 banks. The exercise was designed to test the functionality and availability of the Disaster Recovery Site for the STEP2 SEPA Services, both in terms of file sending/receiving and connectivity to participants’ worksta-tions. EBA CLEARING’s Remote Operational Loca-tions were activated as part of this test. It is planned to make the next crisis simulation exercise, sched-uled for early 2012, mandatory for all direct partici-pants of the STEP2 SEPA Services.

Throughout 2010, EBA CLEARING also continued to test bilaterally agreed fallback arrangements with its providers.

Resilience and business continuityThe EBA CLEARING resilience levels are tested, revised and enhanced on a regular basis. In 2010, the Company continued to perform its daily tasks in parallel for all systems from both its operating centres. Machine and staff rotation were conducted through-out the year in order to keep the staff familiar with both operation centres.

A work programme focusing on incident and crisis management was run with the support of a special-ised consultancy in the first quarter of 2011. This work has resulted in a set of recommendations, which will be taken forward to improve the procedures around crisis and incident management.

In March 2010, and in accordance with the applicable regulatory standards, the EBA CLEARING Board for-mally endorsed the Company’s Business Continuity Policy and Strategy. A dedicated Business Continuity Management Unit was formed in early 2011 and was set to start operating as of 1st May 2011.


As in the previous years, EBA CLEARING continued to nurture strong ties with its shareholder and user community. Responding to and satisfying customer needs stood at the centre of all the Company’s activi-ties. This user-centred focus shaped EBA CLEAR-ING’s approach to day-to-day issue-solving just as much as it marked the Company’s strategic consid-erations.

ICU survey reveals customers are satisfied with service levelsIn its sixth year, the Investigations and Customer Support Unit (ICU) successfully continued its mis-sion to offer the users of the EBA CLEARING Ser-vices a single point of contact and extensive support. During 2010, ICU staff received and followed up on over 3,200 enquiries, a reduction of 7.7 percent over 2009, largely attributed to the participants’ further familiarisation with the SEPA Services.

The results of a survey conducted in early 2011 showed a very high satisfaction rate of 83 percent, which had even increased by 7.4 points since the previous survey. Only a tiny minority of 1.1 percent stated they were not satisfied with the service levels, the rest remained neutral.

Fulfilling customer requestsTo facilitate the circulation of STEP2 service infor-mation and documentation within the relevant bank departments, EBA CLEARING broadened access to its online SEPA documentation to a wider circle of bank contacts as well as to technical facilitators that support STEP2 Banks in their handling of SEPA pay-ments.

Moreover, for 2011 the Company launched its SMS Alert Facility for Incidents, giving direct users of the EURO1, STEP1 and STEP2 Services the oppor-tunity to receive incident alert notifications via their mobile phones. This facility complements EBA CLEARING’s existing incident communication ar-rangements, such as e-mails, Real-Time Window messages and IWS broadcasts.

Informational meetings, road shows and conferencesTo keep the user community updated on EBA CLEARING activities, representatives of the Com-pany participated in the different country group meetings held across Europe. In 2010, special focus continued to be placed on providing users with an in-depth overview of the EURO1 risk mitigation and liquidity management arrangements. A dedicated presentation on this topic was given during country group meetings and at road shows held in Denmark and Sweden. In addition, the Company organised two SEPA Information Sessions, which attracted an audience of about 70 participants each. Briefing meetings with newly connecting participants were held throughout the year.

In December 2010, the Legal Advisory Group orga-nised a legal seminar, bringing together both lawyers and bankers. The seminar focused on fundamental legal principles governing payment systems for fund transfers in the EU/SEPA.

Throughout 2010, EBA CLEARING also participated again in a number of industry events, including EBAday, Italy’s SPIN event, the Frankfurt Euro Finance Week and Sibos, in order to provide the banking industry at large with updates on ongoing Company activities and projects.

Customer support


The steep rise in STEP2 volumes in late 2010 and early 2011 confirms that more and more national communities and individual banks have begun to step up their SEPA migration activities. In this con-text, EBA CLEARING is supporting banks in choos-ing the migration path and pace that best suits their business and change management plans. The STEP2 Irish Service will be an important deliverable for 2011 in this area. It is designed to provide the Irish banks with maximal flexibility in their migration to SEPA. EBA CLEARING is furthermore engaged in AOS-related discussions with a number of com-munities with a view to accommodating their specific needs in the SEPA start-up phase.

Besides these new developments, the Company con-tinues its enhancement program to ready the STEP2 platform for the handling of very large volumes in SEPA. Implementing additional settlement cycles and automated mechanisms around the resending of output files are among the top priorities related to this work stream. These enhancements are taken forward in an open dialogue with the STEP2 SEPA Services users, involving in particular the SEPA Busi-ness Working Group.

The EURO1 review and reform program is an-other important item on the agenda of the Compa-ny for 2011 and beyond. The Future Development Group has issued a number of proposals aimed at re adjusting and improving the EURO1 risk sharing arrangements, liquidity efficiency and participation rules. The Company plans to run a broad discus-sion process amongst the EURO1 Banks on the re-form program. Depending on the feedback received, certain proposed changes to the risk profile of the system will be implemented by the end of this year.

In the area of new service initiatives, EBA CLEAR-ING plans to launch a major consultation process on its envisaged pan-European e-authorisation service. The Company will strive to engage all relevant stake-holders from the e-merchants world, the banks and the consumer side, in this exchange.

The new e-services project will further expand the industry network in which EBA CLEARING operates. It ties in with the Company’s efforts to develop pan-European infrastructure solutions for the benefit of its user banks and the overall industry.

Outlook 2011


Board CommitteesThe Audit & Finance Committee (AFC) has the mis-sion of setting out the policy framework as well as the guidelines for the internal audit and of monitoring the financial status of the Company. It also considers any major findings resulting from internal audit inves-tigations. The AFC is composed of Board members only.

The Innovation Committee’s (InnoCo) mission is to survey market developments, trends and needs in order to assess the practical implications and spe-cific business opportunities for EBA CLEARING. The InnoCo is composed of payment experts from EBA CLEARING Banks with knowledge in key areas, such as IT systems architecture and business devel-opment.

The Operations & Technical Committee (OTC) fo-cuses on the operational, procedural, functional and technical aspects with regard to primarily the EURO1 and STEP1 payment services. Its major task is to examine and propose operational and technical enhancements to the infrastructure of the Company. The OTC is composed of business and technical ex-perts from Shareholder Banks appointed by the dif-ferent national user communities.

The Strategy & Policy Committee (SPC) focuses on addressing the longer-term positioning and develop-ment of EBA CLEARING. Through its monitoring of the payments industry, it aims to identify and assess the banks’ needs in order to propose and evaluate the development of new products and services. The SPC is composed of Board members only.

User Advisory Groups and fora The STEP1 User Advisory Group (STEP1 UAG) serves as a decision-making platform within the STEP1 user community and as a channel to express requirements or proposals towards the Board of the Company and its Committees. The STEP1 UAG is composed of representatives from each country or grouping of users.

The STEP2 XCT User Advisory Group (STEP2 XCT UAG) serves as a decision-making platform within the STEP2 XCT user community and as a chan-nel to express requirements or proposals towards the Board of the Company and its Committees. The STEP2 XCT UAG is composed of representatives from each country or grouping of users.

The STEP2 SEPA Business Working Group (SEPA BWG) serves as a forum in which direct participants in the STEP2 SEPA Services can discuss and provide feedback on issues and developments concerning these services. The SEPA BWG is formed by bank representatives of the different national communities in SEPA. Once the SEPA migration has reached a critical mass, this interim user forum will give way to a more formally defined user say body.

Board Committees, User Advisory Groups and Working Groups


Working GroupsThe e-Services Working Group was created as an ad-hoc working group to accompany the Manage-ment’s examination of various options and models for creating a pan-European e-services solution. The group reports to the Innovation Committee and pro-vides practical recommendations to the discussion around the design and implementation approach for such a solution. It is composed of EBA CLEARING Bank representatives from relevant areas of exper-tise.

The Future Development Group’s (FDG) mission is to carry out a review to ensure that the EURO1 set-up continues to meet the users’ needs in terms of liquidity efficiency, risk control and the loss sharing arrangements. The FDG acts as an advisory group to the Company’s Board and Management. It is com-posed of representatives from the treasury and oper-ations departments of EURO1 Participants that wish to make more use of the service.

The Treasury and Liquidity Group (TLG) acts as an advisory group of experts to the Board and Manage-ment on issues relating to the use of liquidity within EURO1. The TLG is composed of representatives from the treasury departments of EURO1 Partici-pants.


ChAIRMANGiorgio FerreroIntesa Sanpaolo

dEPUTy ChAIRMANRobert HeisterborgING Bank

BOARd MEMBERSJean-Paul AeberhardtCrédit Agricole

Yannick ChagnonSociété Générale

Daniele DaneseBanco Popolare Società Cooperativa

Kristine De LepeleireKBC Bank

Thomas EgnerCommerzbank

Pip EvansBarclays Bank

José Luis Fernández IglesiasBanco Bilbao Vizcaya Argentaria

Rui FonsecaCaixa Geral de Depositos

Diarmuid HanrahanAllied Irish Banks

Olli KähkönenNordea Bank Finland

Hays LittlejohnUBS

Kirstine NilssonSwedbank

Christian WesterhausDeutsche Bank

ChIEf ExECUTIvE OffICERGilbert Lichter

SENIOR MANAGEMENTFrançois BoelsBudget and Finance

John BroxisSTEP2 Services

Eric CharlesGeneral Administration

Eva Herskovicova Operations (as of 1st May 2011)

Daniel SzmuklerCommunications and Corporate Governance

Alan TaylorEURO1 / STEP1 Services

André Vink Business Continuity Management (as of 1st May 2011)

The Board The Management


Eva HerskovicovaCzech Republic and Slovakia

Claus F. HillesAustria, Germany, Switzerland

Luis MinguezSpain

Yasmina SafyFrance

Jette SimsonDenmark, Finland, Norway, Sweden and Baltic Countries

Alan TaylorIreland and United Kingdom

Daniela VinciItaly

André VinkThe Netherlands

FranceEBA CLEARING PARIS40 rue de Courcelles75008 ParisTel: +33 1 53 67 07 00Fax: +33 1 53 67 07 07

BelgiumEBA CLEARING BRUSSELS489 Avenue Louise1050 BrusselsTel: +32 2 643 27 70Fax: +32 2 643 27 71

GermanyEBA CLEARING fRANKfURTPlatz der Republik 660325 FrankfurtTel: +49 69 75 61 49 0Fax: +49 69 75 61 49 17

ItalyEBA CLEARING MILAN10 Piazza Borromeo20123 MilanTel: +39 02 72 01 99 96Fax: +39 02 80 50 04 47

Country Representatives

Offices

REPORT ON ACTIVITIES 2010 Practitioners creating Europe ... · level) and • the ongoing debate around the SEPA migration end-date legislation With the support of the Future Development

Documents