Report on Activities 2013

Transcription

1 PAN-European Processing Report on Activities 2013 Practitioners creating Europe-wide payment infrastructures March 2014

2 Report on Activities EBA CLEARING 4 Overview EURO1 Service 10 STEP1 Service 12 STEP2 Platform 16 STEP2 SCT Service 18 STEP2 SDD Core Service 19 STEP2 SDD B2B Service 20 STEP2 ICT Service 21 STEP2 IET Service 22 MyBank solution 26 Corporate activities 26 System performance, maintenance and enhancements 27 Internal audit, information security and business continuity management EBA CLEARING Cost-saving infra structure solutions for an integrated euro payments environment EBA CLEARING is a bank-owned provider of pan-european payment infrastructure solutions. Established in 1998 by 52 banks, the Company had 62 shareholders by March The mission of EBA CLEARING is to offer efficient and cost-effective solutions in the co-operative space, which generate savings within its user banks. EBA CLEARING is the leading private sector provider of pan-european payment services in euro. It owns and operates EURO1, a large-value payment system with an RTGS-equivalent net settlement arrangement, and STEP1, a single payment service for small and medium-sized banks, as well as STEP2, a Pan-European Automated Clearing House (PE-ACH) processing retail credit transfers and direct debits. By March 2014, over 250 banks across Europe were directly connected to the services offered by EBA CLEARING. The Company is also committed to delivering pan-european solutions in the e-payment area. MyBank, an e-authorisation solution enabling Internet shoppers across Europe to pay via online or mobile banking, was launched on 25 th March Today, MyBank is owned and managed by PRETA S.A.S., a fully owned subsidiary of EBA CLEARING created in November Through regular user group meetings and information sessions, both at European and country level, EBA CLEARING entertains a direct and intensive exchange with its user and stakeholder 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 environment. In co-operation with the Euro Banking Association, EBA CLEARING plays an important role in the banking 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) Legal and compliance Risk management Customer Support Outlook 2014 Board Committees, User Groups, Steering Groups and other expert fora For an in-depth introduction to the EBA CLEARING Services, please consult our e-brochures on EURO1, STEP1 and STEP2: 36 The Board 38 The Management 40 Country Representatives 2 / 42 eba clearing Report on Activities / 42 eba clearing Report on Activities 2013 EBA CLEARING

3 Overview was marked by the major changeover that the SEPA migration end-date for euro retail payments of 1 st February 2014 represented for payment service providers in the Eurozone and their customers. SEPA migration-related activities were also the top priority for EBA CLEARING throughout The Company continued to strengthen and enhance the STEP2 platform and intensified its customer support activities to assist its users across Europe in ensuring a disruption-free changeover to the SEPA instruments for their customers. Helping the banks ensure a disruption-free SEPA changeover SEPA migration affirmed the position of the STEP2 platform among the leading retail payment systems in Europe. The timely delivery of its SEPA Services as well as the processing capacity, operational robustness and rich functionality of the system made STEP2 the platform of first choice of many European communities in preparation of and during this migration. Major new features, such as the SDD COR1 option, connectivity via EBICS and an SCT cycle with a sending cut-off at 16:00 CET were implemented in 2013 in order to facilitate the banks migration and satisfy their needs in SEPA. With the support of its technology partner SIA, EBA CLEARING brought significant capacity upgrades and performance enhancements to the system in preparation of the SEPA ramp-up phase. A third processing site for STEP2 was activated in January 2014 to ensure that the STEP2 resilience arrangements cover regional disasters. The Company also orchestrated a major testing exercise for the large-volume users of STEP2 and fine-tuned its operational emergency procedures for the migration period following consultations with a dedicated working group. Based on these preparations, STEP2 was able to smoothly onboard both the very large volumes pre-advised by banks and additional traffic sent by communities that had not completed the build-up of their national infrastructure solutions in time. The STEP2 platform thus was instrumental to banks in meeting the deadlines and legal requirements related to this challenging migration exercise. Further reducing mandatory risk-taking in EURO1 EURO1 continued to provide a resilient and robust first choice, alongside TARGET2, for processing single payments. EBA CLEARING kept pursuing its work geared at further reducing mandatory risk-taking in the system. A key deliverable in 2013 consisted in a change to the loss sharing arrangement, which was implemented in order to put more control back in the hands of the users and to encourage tighter risk management practices. Evolving the EURO1/STEP1 and STEP2 Services as well as strengthening the Company s second and third lines of defence in accordance with existing and emerging regulatory requirements were other key items on the agenda in Satisfying evolving user needs in the collaborative space At the same time, EBA CLEARING continued its efforts aimed at satisfying the evolving needs of its users in the collaborative space. The go-live of MyBank on 25 th March 2013 marked the start of a progressive roll-out of this pan-european e-authorisation solution to customers across the continent. By the end of 2013, pioneering banks from Italy, France and Luxembourg had activated MyBank on approximately 10 million customer accounts and the first major e-billers and e-merchants had adopted the solution. 4 / 42 eba clearing Report on Activities 2013 Overview / 42 eba clearing Report on Activities 2013 Overview 2013

4 EURO1 Service A liquidity-saving net settlement system optimally supporting its users in their counterparty and risk management In 2013 and early 2014, EURO1 continued to provide a resilient and robust first choice for processing single euro payments. During an ongoing period of major risk concerns and high liquidity costs, the EURO1 Service has been optimally supporting its users in maximising their liquidity efficiency and minimising their ri sk exposure. Over the past year, EBA CLEARING kept pursuing its work geared at further reducing mandatory risk-taking in the system and supporting the participants in optimising their liquidity management. Further strengthening the participants risk management controls A key deliverable consisted in a change to the loss sharing arrangement, which took place in June 2013 as part of the EURO1 reform program. Until then, the calculation was only based on the bilateral limit allocations by the surviving banks for up to three failures; in case of four or more failing banks, the loss shares were calculated based on the total credit caps of the surviving banks. Now, the loss sharing calculation is based on the bilateral limit allocations to the failing banks in the case of any bank failure situation, i.e. regardless of the number of failing banks. This single approach to the loss sharing calculation puts more control back in the hands of the users and encourages tighter risk management practices as the amount of the loss share to be allocated will truly reflect the risk control measures applied by each participant towards the stricken banks. In 2014, the Company continued its efforts geared at further enhancing the risk reduction controls in EURO1. A proposal to further reduce the mandatory limits was prepared for submission to the Shareholders Meeting It consisted in a change of the mandatory limits to a formula where the sum of the mandatory limits granted to a participant in the system matches at all times the amount of one participant share in the Liquidity Pool of EURO1. This change, which was approved by the Shareholders Meeting 2014 and will be implemented in November 2014, will be covered in more detail in the Report on Activities Optimising usability: enhanced EURO1/ STEP1 Directory launched in October 2013 Over the past year, EBA CLEARING together with SWIFT further enhanced the functionality and usability of the EURO1/STEP1 Directory. The revamped EURO1/STEP1 Directory was launched in October 2013 and can now be easily integrated into the banks infrastructure since it was included in the SWIFTRef Bankers World Online. This ensures that data from the EURO1/ STEP1 Directory can be received together with data from other directories managed by SWIFT in one or more files according to the general formats and content requirements of the individual 6 / 42 eba clearing Report on Activities 2013 EURO1 Service 7 / 42 eba clearing Report on Activities 2013 EURO1 Service

5 Key facts and figures (status: March 2014) Function RTGS-equivalent large-value payment system on a multilateral net basis, for single euro transactions of high priority and urgency, and primarily of large amount Fully compliant with the 10 Core Principles for Systemically Important Payment Systems (SIPS) Overseen by the European Central Bank (ECB) Participation 62 Participants / 47 Sub-Participants Live date 4 th January 1999 Technical Operator SWIFT Reach More than 8,000 participant BICs and over 18,000 additional BICs reachable via EURO1/STEP1 Participants as listed in the EURO1/STEP1 Directory Average daily volume 220,437 transactions Settlement of single obligation at the end of the day in TARGET2 via the Ancillary System Interface Average daily Value (ASI4) EUR billion Special facts or features Legal basis Single Obligation Structure (SOS) recognised and enforceable in every EU jurisdiction and OECD jurisdictions outside the EU where participants have their registered Head Offices in 2013/2014 Implementation of one single approach to EURO1 loss sharing calculation as part of EURO1 reform program to give more control to the participants Launch of enhanced EURO1/STEP1 Directory in June 2013 EURO1: average daily volume of payments processed 300, , , , , banks and their back-office systems. At the same time, banks wishing to only receive information from the EURO1/STEP1 Directory can continue to access the directory via the EBA CLEARING website. Additional enhancements include the implementation of improved data maintenance and confirmation processes. Outlook beyond 2014: more enhancements to come Many of the deliverables planned for the near to mid-term future are geared at helping users to further mitigate risks related to the processing and settlement of payments. These developments will ready EURO1 for compliance with the new CPSS-IOSCO Principles for Financial Market Infrastructures (PFMIs) that are expected to be implemented in Together with the Operations and Technical Committee (OTC), preparations are also ongoing for the changeover of EURO1 from MT message formats to the ISO XML standard in November The migration will follow a like-for-like approach, which will only have a minimal impact on the participants in terms of implementation requirements and costs. This approach further ensures the highest level of stability for the processes at the level of the EURO1 system and of the banks. It is planned that the platform will migrate to ISO XML in parallel with TARGET2, which will enable all EURO1 Participants to seamlessly continue benefiting from the cost-effective and resilient infrastructure as well as from the liquidity-efficient functionality of the system. In parallel to following this minimal MX migration implementation scenario, the Company plans to start a work stream under the guidance of the Strategy and Policy Committee geared at evolving EURO1 into a highly agile payment platform ready to adapt to emerging payment infrastructure requirements in a fast-changing environment. The Company will also review the EURO1 admission and participation criteria to ensure that they continue to be adequate. 8 / 42 eba clearing Report on Activities 2013 EURO1 Service 9 / 42 eba clearing Report on Activities 2013 EURO1 Service

6 Key facts and figures (status: March 2014) 79 STEP1 Participants STEP1 Sub-Participants 23 Participation in STEP1 (as of March 2014) STEP1 Service A turn-key solution for single euro processing The STEP1 Service offers a direct and costeffective plug and play access to a highly resilient single euro payment processing infrastructure. Thanks to its low joining and running costs as well as its wide reach across and beyond Europe, STEP1 provides considerable value to smaller and medium-sized banks. Function Payment service for single euro payments of high priority and urgency, complementary to EURO1 and pre dominantly geared towards small and medium-sized banks Live date 21 st November 2000 Technical Operator SWIFT Average daily volume 14,453 transactions Average daily value EUR 1.3 billion Legal basis STEP1 benefits from the solid legal framework underpinning of EURO1 Participation 79 Participants / 23 Sub-Participants Reach More than 8,000 BICs directly addressable and over 18,000 BICs reachable via EURO1/ STEP1 Participants as listed in the EURO1/ STEP1 Directory Settlement A STEP1 Participant settles with a EURO1 Bank of its choice but directly exchanges payments with all EURO1/STEP1 Participants These benefits also make STEP1 an appealing offering for larger-sized banks whose Head Office is not located in an EU or OECD country and that look for an efficient and cost-saving way to feed their one-leg-out euro transactions into the European market. Because of the domiciliation of their Head Office, these banks do not fulfil the admission criteria for EURO1. Over the past few years, STEP1 has attracted several EU branches of non-european banks and this trend will continue in / 42 eba clearing Report on Activities 2013 STEP1 Service 11 / 42 eba clearing Report on Activities 2013 STEP1 Service

7 A highly robust platform with best-of-breed functionality Functionality-wise, STEP2 witnessed several improvements in 2013: The first two banks started exchanging files in the batch processing mode in October Batch processing is a highly efficient processing mode where banks exchange batches of files that are pre-sorted by receiving bank and require less validation. EBICS was introduced in November 2013 as a third network option for sending and receiving payment transactions to and from STEP2. The Large Volume Exchange Program continued with major testing exercises, such as peak day simulation testing, and the introduction of a volume alert system to anticipate migration peaks. The Company further intensified the direct exchange with its users on migration-related topics through the introduction of weekly calls with critical and highly active users in November 2013, regular STEP2 SEPA Business Working Group meetings and user group meetings at country level as well as through a closer monitoring of migration activities on a by-country basis. Continued evolution of the STEP2 system STEP2 platform The strategic choice for SEPA migration STEP2 played a crucial role in the strategic planning of many communities and banks across Europe in the run-up to the SEPA migration end-date for the Eurozone on 1 st February Accordingly, in 2013 EBA CLEARING put a key focus on readying the platform for the last phase of this major changeover exercise. The activation of a third processing centre for the STEP2 SEPA Services in January 2014 has placed STEP2 among the leading payment infrastructure systems in Europe in terms of operational and technical resilience, reflecting the platform s growing systemic importance. With the support of its technology provider SIA, EBA CLEARING upgraded the performance of the system in the course of 2013 to prepare the platform for coping with the expected increase in SEPA volumes. EBA CLEARING also put in place optional services requested by one or more communities, such as the SDD Core D-1 Scheme Option or the mandate alignment service SEDA, which enables Italian banks to exchange mandaterelated information. The Company will continue to explore possibilities with its users geared at evolving any services pioneered in one community into pan-european offerings. Extensive coordination with users and providers to ensure SEPA readiness In order to establish the necessary SEPA readiness at the level of all parties involved, EBA CLEARING extensively coordinated its STEP2-related activities with its service users and providers and closely monitored the migration progress: With the support of STEP2 Participants, the Company worked on identifying SEPA migrationrelated operational contingency scenarios and implemented measures aimed at mitigating the impact of such scenarios on the good functioning of STEP2. Over the past year, EBA CLEARING has also further pursued the project of enhancing the certainty of the settlement of the STEP2 SEPA Services. A first set of measures geared at improving the provision of settlement information to participants and thus increasing predictability of liquidity needs is scheduled for implementation in November In response to user requests for an ISO compliant card clearing service, the Company has started to develop a STEP2 service that will clear transactions originated by card payments. These and other projects geared at evolving the platform in line with user needs and regulatory requirements will be taken forward throughout and beyond / 42 eba clearing Report on Activities 2013 STEP2 Platform 13 / 42 eba clearing Report on Activities 2013 STEP2 Platform

8 KEY FACTS AND FIGURES (status: March 2014) FUNCTION Pan-European Automated Clearing House SPECIAL FACTS OR FEATURES IN 2013/2014 Disruption-free onboarding of large domestic volumes in the run-up to the SEPA migration end-date: the overall STEP2 STEP2 evolution in 2013/2014 Daily average volumes and key enhancements EBICS activation STEP2 Feb 2014 release live (PE-ACH) platform for processing euro retail traffic grew by close to 550 percent payments from March 2013 to March 2014, from LAUNCH 28 th April m to 34.8m transactions processed on average per day The processing capacity, resilience arrangements and functionality of the End-to-end high volume test 3 rd pole contractually live TECHNICAL OPERATOR platform and its services were further SIA upgraded during this period Batch AVERAGE DAILY VOLUME 34,825,863 transactions SCT processing activation AVERAGE DAILY VALUE EUR 41.5 billion 40 m performance enhancements SCT LEGAL BASIS STEP2 is overseen by the European Central Bank and fully complies with the six CPSS Core Principles applying to Prominently Important Retail Payment Systems (PIRPS) the four criteria for SEPA-compliant infrastructures defined by the ECB 35 m 30 m 25 m Implementation of SDD batch processing SDD performance enhancements 16:00 cut-off live SDD COR1 option activation Total SCT 20 m 15 m 10 m SDD 5 m 0 m SEPA Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar 14 / 42 eba clearing Report on Activities 2013 STEP2 Platform 15 / 42 eba clearing Report on Activities 2013 STEP2 Platform

9 A key pipeline for domestic and cross-border Following the first exchange of SCT batches SEPA transactions between two German banks in late October 2013, large volume users in STEP2 started to succes- The STEP2 SEPA Credit Transfer (SCT) Service sively activate the batch processing functionality witnessed a steep volume evolution in 2013, for their bilateral exchange of high volumes of moving from an average of 3.1 million transac- both SCT and SDD transactions via STEP2. tions processed per day in December 2012 to a daily average of almost 10 million transactions in December By March 2014, the service Introduction of a new SCT cycle with a handled on average close to 15 million credit 16:00 CET sending cut-off transfers per day. In line with user requests and following extensive STEP2 SCT SERVice REACH By the end of 2013, approximately 85 percent of user consultation, the Company implemented an Key facts and figures (status: March 2014) More than 4,600 reachable banks, of which 70 percent are reachable via Direct Partici- the traffic in STEP2 SCT was composed of domestic transactions, mostly coming from Germany, additional SCT cycle on the STEP2 platform on 30 th September The sending cut-off for this pants and the other 30 percent via links Finland, Italy, France, the Netherlands and last SCT settlement cycle in the day stands at FUNCTION established with 14 other SEPA CSMs Luxembourg. Several communities, including the 16:00 CET and thus allows banks to submit credit ACH service processing SEPA Credit Trans- Estonian banks, migrated all their euro retail pay- transfers for same-day settlement up to two hours fers and providing full pan-european reach SETTLEMENT ments to STEP2 as part of the SEPA changeover. later than they were previously able to do. The Positions provided by Multilateral Netting necessary procedures were put in place to ensure LIVE DATE Module (MNM) are settled in TARGET2 via STEP2 SCT continued to provide full reachability that the settlement of this cycle takes place 28 th January 2008 the Ancillary System Interface (ASI) to financial institutions across SEPA with 127 before 17:00 CET. direct participants connected to the platform and AVERAGE DAILY VOLUME SPECIAL FACTS OR FEATURES more than 4,600 reachable BICs registered in With the new cycle in place, STEP2 SCT users 14,847,167 transactions IN 2013/2014 the routing table of the service. have at their disposal four intra-day, one over- In February 2014, the daily average vol- night and two optional night-time settlement AVERAGE DAILY VALUE umes in STEP2 SCT reached an all-time cycles. In an open dialogue with its users, EUR 34.6 billion record with 15,006,802 processed trans- Gradual pick-up of batch processing EBA CLEARING will continue to assess existing actions functionality and emerging user requirements in this area LEGAL BASIS STEP2 SCT witnessed a new peak day on with a view to evolving its settlement cycle Compliant with the SEPA Credit Transfer 2 nd March 2014, surpassing the 25 million EBA CLEARING continued to bring enhance- arrangements in response to these needs and Scheme Rulebook and Implementation mark for the first time ments to the SCT Service in 2013 in line with its expectations. Guidelines of the European Payments A new STEP2 SCT settlement cycle with a release schedule. These included, among others, Council (EPC) sending cut-off at 16:00 CET and settle- features geared at helping the banks to optimise ment before 17:00 CET was introduced in their handling of payment file cancellations in the PARTICIPATION September 2013 batch processing mode. 127 Direct Participants 16 / 42 eba clearing Report on Activities 2013 STEP2 Platform 17 / 42 eba clearing Report on Activities 2013 STEP2 Platform

10 STEP2 SDD Core Service REACH STEP2 SDD B2B Service LEGAL BASIS KEY FACTS AND FIGURES (status: March 2014) Over 3,900 reachable banks, of which 70 percent are reachable via Direct Participants KEY FACTS AND FIGURES (status: March 2014) Compliant with the SEPA B2B Direct Debit Scheme Rulebook and Implementation and the other 30 percent via links estab- Guidelines of the European Payments FUNCTION lished with 13 other SEPA CSMs FUNCTION Council (EPC) ACH service processing SEPA Core Direct ACH service processing SEPA Business-to- Debits and providing full pan-european reach SETTLEMENT Business (B2B) Direct Debits and reaching PARTICIPATION Positions provided by Multilateral Netting every financial institution in Europe that offers 78 Direct Participants LIVE DATE Module (MNM) are settled in TARGET2 via this payment instrument to its customers 2 nd November 2009 Ancillary System Interface (ASI) REACH LIVE DATE Over 3,300 reachable banks, of which AVERAGE DAILY VOLUME SPECIAL FACTS OR FEATURES IN 2 nd November percent are reachable via Direct Partici- 19,533,696 transactions 2013/2014 pants and the other 30 percent via links In February 2014, the daily average vol- AVERAGE DAILY VOLUME established with 13 other SEPA CSMs AVERAGE DAILY VALUE umes in STEP2 SDD Core reached an 293,336 transactions EUR 4.4 billion all-time record with over 15 million pro- SETTLEMENT cessed transactions AVERAGE DAILY VALUE Positions provided by Multilateral Netting LEGAL BASIS STEP2 SDD Core witnessed a new peak EUR 2.2 billion Module (MNM) are settled in TARGET2 via Compliant with the SEPA Core Direct Debit day on 4 th March 2014 surpassing the 85 Ancillary System Interface (ASI) Scheme Rulebook and Implementation Guide- million mark lines of the European Payments Council (EPC) The SDD Core D-1 Scheme option was activated for about 2,600 BICs in the PARTICIPATION STEP2 SDD Core routing table on 4 th 93 Direct Participants November 2013 A steep volume ramp-up for Europe s leading volumes pre-advised by banks and additional Big bang activation of SDD COR1 Scheme Postponement of SDD sending cut-offs and SDD clearing service traffic sent by communities that had not complet- Option for 2,600 BICs decoupling from settlement processes ed the build-up of their national infrastructure The STEP2 SEPA Core Direct Debit (SDD Core) solutions in time. On 4 th November 2013, EBA CLEARING activat- Based on the 2013 user consultation and further Service onboarded substantial volumes of domes- ed the SDD Core D-1 (SDD COR1) Scheme discussions among the users, EBA CLEARING tic direct debits from summer 2013 to February STEP2 SDD Core continued to provide full Option for about 2,600 BICs in the STEP2 SDD decided in early 2014 to decouple the SDD sending Daily average traffic grew from 840,242 reachability to financial institutions across SEPA Core routing table. This scheme option had been cut-off for future direct debits from the settlement transactions in August 2013 to over 15 million with 93 direct participants connected to the available on the platform since 2012 and allows of transactions being settled on that day. At the same transactions in the month following the SEPA platform and more than 3,900 reachable BICs creditor banks to send any SDD collections up time, these sending cut-offs will be moved to later migration end-date. A new record peak was registered in the routing table of the service. until D-1 within a closed user group arrangement. points in the day for both the STEP2 SDD Core and reached on 4 th March 2014 with more than 85 B2B Services. In detail, the SDD B2B sending cut-off million transactions processed. The daily average volumes processed in the EBA CLEARING s mass provisioning exercise in will be moved from 12:00 to 15:00 CET and the STEP2 SDD Business-to-Business (B2B) Service November 2013 put in place full SDD COR1 SDD Core sending cut-off from 11:00 to 16:00 CET. This traffic rise was mainly a result of banks from started to grow in the last quarter of 2013, pass- reach for BICs in Austria and Germany; by March Germany, the Netherlands, Belgium, France and ing from a daily average of 23,652 transactions 2014, complete coverage had also been achieved With this change, which will be implemented in Italy channelling domestic direct debits through in October 2013 to 71,028 in December A for the Spanish community. November 2014, the STEP2 users are taking an STEP2. Thanks to EBA CLEARING s extensive new peak was reached on 3 rd February 2014 with additional step towards aligning cut-off times for SEPA migration-related preparations with both its 307,695 transactions settled. Altogether, over SEPA services across different communities. The users and providers, the STEP2 platform was 3,300 BICs were registered in the STEP2 SDD Company will evaluate further changes in more detail able to smoothly absorb both the very large SDD B2B Routing Tables by March with the community of users in the course of / 42 eba clearing Report on Activities 2013 STEP2 Platform 19 / 42 eba clearing Report on Activities 2013 STEP2 Platform

11 STEP2 ICT Service Progressive migration from STEP2 ICT STEP2 IET Service Providing a stepping stone to SEPA KEY FACTS AND FIGURES (status: March 2014) to SCT in 2013 and early 2014 KEY FACTS AND FIGURES (status: March 2014) Over the past year, the STEP2 Irish Transfer Volumes in the STEP2 Italian Credit Transfer (IET) Service continued to ensure the daily FUNCTION (ICT) Service progressively decreased through- FUNCTION settlement of legacy Irish credit transfers and Euro retail payment service for Italian out the second half of 2013 and early 2014, Euro retail payment service ensuring the direct debits between the six direct participants domestic credit transfers designed to due to the migration of these transactions to settlement of Irish domestic credit transfers in the service. facilitate the progressive migration of STEP2 SCT. and direct debits. STEP2 IET was designed these payment flows to SEPA to facilitate the progressive migration of In the period under report, daily average volumes By March 2014, the overall traffic in the service these legacy payments to SEPA. decreased from an average of over 700,000 LIVE DATE had decreased by 91 percent compared to transactions per day to 40,598 transactions per 24 th November 2006 March The service is expected to close LIVE DATE day in March 2014, reflecting the ongoing migra- down in the second half of th October 2011 tion of the Irish payment volumes to the STEP2 AVERAGE DAILY VOLUME SEPA Services. The STEP2 Irish Transfer Service 111,066 transactions AVERAGE DAILY VOLUME is foreseen to close down on 31 st July ,598 transactions PARTICIPATION 6 Direct Participants / 63 Indirect PARTICIPATION Participants 6 Direct Participants SETTLEMENT SETTLEMENT in the EURO1/STEP1 system Positions provided by Multilateral Netting Module are settled in TARGET2 via Ancillary System Interface (ASI) 20 / 42 eba clearing Report on Activities 2013 STEP2 Platform 21 / 42 eba clearing Report on Activities 2013 STEP2 Platform

12 MyBank solution Growing support for MyBank amongst e-merchants By early 2014, merchant acquisition had taken off on a larger scale, with the Italian community taking the lead in this area as well. The list of major Italian corporates and online businesses offering MyBank includes Enel Energia, Italy s key energy provider, Tirrenia CIN, the leading shipping company connecting the mainland with the Italian islands and Alpitour World, a major tourism company, as well as online insurer Zurich Connect. Feedback from the merchants that have rolled out the solution has been positive, both in terms of the effort and investment involved in the implementation as well as in terms of customer response to this new payment option. Launch of the MyBank SCT application in March 2013 MyBank was launched in March 2013 with 10 banking groups, representing a total of 28 individual participating institutions. MyBank went live in three countries with a solution supporting the initiation of SEPA Credit Transfers for online purchasing transactions. In a first phase, MyBank focused on onboarding banks, which resulted in the solution being offered by over 140 financial institutions by the second quarter of A Service Provider Program was launched in 2013 for companies supporting financial institutions and/or merchants in connecting to MyBank. By March 2014, 12 providers had completed the self-certification process that is part of this program. In December 2013, EBA CLEARING launched an enhanced version of the MyBank SCT application, which facilitated the usage of mobile applications to initiate and authorise MyBank transactions on mobile devices. Within less than twelve months after the launch, MyBank became available to twelve million retail customer accounts, building reach in Italy in particular. 22 / 42 eba clearing Report on Activities 2013 MyBank Solution 23 / 42 eba clearing Report on Activities 2013 MyBank Solution

13 The MyBank four-corner model Paying online through your own bank The electronic authorisation and Once you have clicked the MyBank the transfer of payments are button and selected your bank, you are handled through the seller and automatically directed to your own online buyer banks. banking portal. Transferring the MyBank activities MyBank Mandates expected to be live Outlook 2014: Preparations are under way at the level of the to a dedicated corporate vehicle in October 2014 expanding the MyBank portfolio financial institutions supporting MyBank to further step up their onboarding activities with regard to Throughout the second half of 2013, EBA A MyBank Mandate pilot was launched in As a pan-european e-authorisation solution, e-merchants, corporate customers and public CLEARING explored various options for pro- October 2013 with participants from six countries. MyBank continues to support the growth of administrations. It is also expected that MyBank viding the MyBank initiative with an appropriate A MyBank solution supporting the creation, modifi- e-commerce in Europe by offering a simple and will become available in more European coun- corporate vehicle in order to allow the initiative cation and cancellation of SEPA Core Direct Debits secure way of buying online and paying through tries in 2014 and to evolve, innovate and grow in the new e-author- is scheduled to go live on 27 th October the SEPA instruments. isation, e-payment and e-commerce space. To Furthermore, a major focus in 2014 will be put that effect, the Company created on 14 th Novem- Another mandate solution to be launched on the Both the existing and any new MyBank function- on considering the impact of the new Payment ber 2013 a fully owned subsidiary under French same date will support mandates by consumers ality will be covered by regular risk assessments Services Directive (PSD2) and the access-to- law, named PRETA S.A.S., which took over the waiving their automatic no-questions-asked to adapt the MyBank security model to techno- account requirements it stipulates on the posi- MyBank assets and activities in March refund right. This will help bridge the gap between logical evolution, regulatory requirements and tioning of MyBank. Since MyBank provides a today s situation, where no-refund direct debits user expectations. highly secure interface for accessing payment still exist as niche products in several countries, accounts, it could be positioned as a solution and the introduction of a pan-european scheme responding to the requirement for banks to give foreseen in the coming years. MyBank Mandates third party providers access to payment accounts. do not interfere with the statutory refund rights MyBank also holds a significant potential in the provided under consumer law. area of e-identity services, which will be further explored in 2014 and beyond. It is planned to include SEPA B2B Direct Debit mandates in the MyBank Mandate portfolio. 24 / 42 eba clearing Report on Activities 2013 MyBank Solution 25 / 42 eba clearing Report on Activities 2013 MyBank Solution

14 STEP2 capacity upgrades for peak days with 100+ million transactions In the first half of 2013, the processing speed and capacity of the STEP2 platform were further upgraded to enable the handling of up to 500 million SEPA Credit Transfers and SEPA Direct Debits within a day. This readied the platform for the processing of peak days of over 100 million transactions, which the system started seeing in March EBA CLEARING also introduced a batch processing mode for SEPA Direct Debits and enhanced validation and reporting functionality around the existing SEPA Credit Transfer batch processing mode in the course of By processing messages that are pre-sorted by receiver and matching the R-transactions it receives, the STEP2 batch processing mode combines key advantages of both bilateral file exchange and the use of a central clearing platform. From the last quarter of 2013 on, STEP2 started to witness a significant increase in batch processing volumes. Internal audit, information security and business continuity management system performance, maintenance and enhancements The systems, applications and networks managed and operated by EBA CLEARING performed according to the agreed service levels and in line with the highest resilience and security standards during the period under report. Based on an extensive testing and system upgrade exercise in co-operation with the users of the STEP2 SEPA Services and EBA CLEARING s technology provider SIA, the processing of growing SEPA volumes took place in a smooth and reliable manner, without any delays or disruptions. The EBA CLEARING resilience levels and business continuity arrangements are tested, revised and enhanced at regular intervals. The Company performs its daily tasks in parallel for all systems from two of its operating centres. Machine and staff rotation were conducted throughout the period under report in order to keep the staff familiar with the different operation centres. Enhanced STEP2 resilience covering regional disasters By activating a third processing site for the STEP2 SEPA Services in January 2014, EBA CLEARING further strengthened the resilience of the platform in the light of its growing strategic significance to communities across Europe. By putting in place a third pole for the STEP2 system architecture that is located at a sufficient distance from its first and second processing sites, the Company has ensured that its system operations cannot be directly affected by the same regional disaster. As part of these enhanced business continuity arrangements, the Company also opened a third centre for its Operations Department in Frankfurt, Germany, in addition to its existing centres in Brussels and Paris. In preparation of the SEPA migration end-date, EBA CLEARING undertook a review of the STEP2 Operational Procedures with the support of its users in order to prepare for exceptional circumstances. As a result, temporary changes were brought to the STEP2 operational emergency procedures to grant EBA CLEARING as system operator the necessary authority to address SEPA migration specific disruptions that might occur during the run up to the SEPA migration end-date. Throughout 2013 and early 2014, the business continuity procedures of EBA CLEARING were tested in a number of internal and external exercises. A STEP2 Crisis Simulation exercise that took place in late 2013 with the support of SIA and five volunteering user banks involved for the first time the third pole. The Company s Business Continuity Management System (BCMS), which had been compliant with BS25999, was aligned with the International Standard ISO in the course of the year. 26 / 42 eba clearing Report on Activities 2013 Corporate Activities 27 / 42 eba clearing Report on Activities 2013 Corporate Activities

15 Establishing an Internal Audit function Risk management risk awareness and risk practices overall and in particular those that are most applicable to The Internal Audit function was created in the Company, namely reputational and opera- January 2013 in order to further strengthen the The function of Chief Risk Officer was created tional risk. Company s organisational processes and remain in January 2013 in order to further strengthen the in line with the requirements of the new CPSS- Company s organisational processes for risk The Risk Management function assures that risk ISO certification confirmed for 2014 IOSCO Principles for Financial Market Infrastruc- management. The Risk Management function tools and methodologies are developed and tures (PFMIs). was charged with the centralisation and imple- properly maintained, in line with best industry The Information Security Management System mentation of a Risk Management Framework practice and any requirements stemming from of EBA CLEARING maintained its ISO In the period under report, a formal audit struc- (RMF) which had been developed in One the regulatory framework. certification for 2014 following a first formal ISO ture in line with best industry practice was embed- of its key objectives is the promotion of strong surveillance audit conducted in late ded within the Company. Internal Audit was posi- tioned as being the third line of defence, key to maintaining the Company s internal robustness. Customer support 45+ country group meetings and 70+ bilateral meetings in 2013/2014 Legal and Compliance ongoing exercise. In the context of this exercise, the Company will also address governance As in previous years, EBA CLEARING continued to foster strong ties with its shareholder User consultation and information are top priorities for EBA CLEARING, which translated into matters, general business risk and recovery and and user community. Responding to and satisfy- a great number of meetings held at regional, The upcoming implementation of the CPSS- orderly wind down planning as well as other ing customer needs stood at the core of all the national and bilateral level as well as at the level IOSCO Principles for Financial Market Infra- areas impacted by the new requirements for Company s activities. This user-centred focus of the different service communities. structures (PFMIs) was a key focus of the FMIs. shaped EBA CLEARING s approach to day-to-day Company in 2013 and continuing in issue-solving just as much as it marked the Besides organising regular committee, user The compliance function within the Company is Company s strategic considerations. advisory group and working group meetings, EBA EURO1 and STEP2 were fully compliant with being enriched with a specific group control and CLEARING representatives participated in over the oversight requirements based on the Core compliance framework, given in particular that The Investigations and Customer Support Unit 45 country group meetings held in 15 different Principles for Systemically Important Payment EBA CLEARING has created PRETA S.A.S. as (ICU), which provides the users of the EBA countries in 2013 and early Systems (SIPS). Achieving compliance with the a fully owned subsidiary into which the MyBank CLEARING Services with a single point of PFMIs is therefore approached starting from a activities have been transferred. In addition, an contact for their queries, handled on average Five information sessions on MyBank and one gap analysis, which was conducted during 2013 annual compliance program is being developed 141 cases per month in on the STEP2 SEPA Services took place during against the PFMIs and the draft ECB Regulation for the specific purpose of compliance with the the period under report as well as more than on oversight requirements for SIPS. oversight requirements for SIPS as a result from 70 bilateral meetings with existing and potential the ECB Regulation implementing the PFMIs for users. In addition, roadshows were held in the The evolvement of STEP2 from a Prominently payment systems. Nordic and Baltic countries and Croatia. EBA Important Retail Payment System (PIRPS) to a CLEARING speakers contributed to around 40 SIPS will be of particular significance in this conferences as well as other industry events. 28 / 42 eba clearing Report on Activities 2013 Corporate Activities 29 / 42 eba clearing Report on Activities 2013 Corporate Activities

16 Outlook 2014 The delivery of efficient and highly reliable interbank payment services on a daily basis will remain the key aim of EBA CLEARING as the integration and consolidation of the European payments markets continues. Accordingly, many of the deliverables planned for EURO1 and STEP2 for 2014 are geared at helping users to further mitigate risks related to the processing and settlement of payments handled by these services. These and other developments will also be taken forward in order to ready the EBA CLEARING Services for compliance with the new regulatory requirements that took shape in 2013 and are expected to be implemented in Regarding EURO1, preparations are also ongoing for the changeover of the system from MT to MX in In accordance with industry expectations, the platform will migrate to ISO XML in parallel with TARGET2, which will enable its users to seamlessly continue benefitting from the cost-effective and robust infrastructure as well as from the liquidity-efficient functionality of EURO1. consist in shaping MyBank into an instrument that will help the payments industry respond to upcoming requirements, such as in the area of account access foreseen in the new Payment Services Directive (PSD2). Taking SEPA as a starting point for new developments In the light of these opportunities, a major focus of EBA CLEARING for the upcoming year and beyond will be placed on taking the necessary steps to further strengthen the strategic positioning of the Company s services and to develop its service portfolio. In this context, EBA CLEARING will continue its open dialogue with the Euro Banking Association and feed the results of the Association s research and assessments into the Company s service development projects. While preparing to meet short- and mid-term regulatory and industry requirements, EBA CLEARING will at the same time look at the expectations and future requirements of its users and their customers in the Single Euro Payments Area. SEPA is a starting point for designing payment services that serve bank customers in better or new ways, based on uniform standards that do not require constant adjustments at the level of both banks and their customers. The MyBank solution, in particular, can provide the basis for the development of a wider range of payment services in the collaborative space. MyBank holds a great potential in the area of e-mandate creation and handling and in the area of e-identity services. The central mission of EBA CLEARING s fully owned subsidiary PRETA will 30 / 42 eba clearing Report on Activities 2013 Outlook / 42 eba clearing Report on Activities 2013 Reviewing the Company s governance arrangements The evolving activities of the Company and the relevance of its SEPA Services have brought again to the fore the question regarding the need to evolve the governance arrangements of the Company. With the migration of major volumes to the STEP2 SEPA Services nearly completed and service usage patterns becoming more stable, the time has come to revisit this matter in an open dialogue with the Company s shareholders and service users. Outlook 2014

17 Board Committees, User Groups, Steering Groups and other expert fora Board Committees The Audit & Finance Committee (AFC) has the mission of setting out the policy and the guidelines for the internal and external audit of the Company and its activities, and to define and monitor the internal audit requirements as well as the tasks entrusted to external auditors. The AFC is further in charge of reviewing and monitoring the financial situation of the Company. The AFC is composed of Board members only. The Board Risk Committee (BRC) has the purpose of assisting the Board of Directors in fulfilling its oversight responsibilities with regard to the risk tolerance of the Company and the risk management and compliance framework. The BRC is composed of Board members only. The Legal Advisory Group s (LAG) mission is to analyse and review proposals from a legal point of view and to formulate recommendations regarding the same. The LAG also assists in the monitoring of legal projects and formulates recommendations regarding the resourcing for such projects. The members of the LAG are in-house lawyers at banks that are members of the Euro Banking Association and/or shareholders of EBA CLEARING. The Operations & Technical Committee s (OTC) focus is to recommend enhancements to the operational, procedural, functional and technical aspects with regard to the EBA CLEARING Services EURO1, STEP1 and (where relevant) STEP2. 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 experts from Shareholder Banks appointed by the different national user communities. The Strategy & Policy Committee (SPC) focuses on addressing the longer-term positioning and development 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. 32 / 42 eba clearing Report on Activities 2013 Governance and user groups 33 / 42 eba clearing Report on Activities 2013 Governance and user groups

18 User groups Steering Groups and other expert fora The Steering Group on SEPA Large Volume The Operational Procedures Working Group s Exchange (SEPA LVE SG) is geared at facilitat- (OPWG) aim was to identify SEPA migration- The STEP1 User Advisory Group (STEP1 The Future Development Group s (FDG) ing the migration of large domestic retail volumes related operational contingency scenarios and to UAG) serves as a decision-making platform within mission is to carry out a review to ensure that the to EBA CLEARING s SEPA infrastructure. The recommend measures aimed at mitigating the the STEP1 user community and as a channel EURO1 setup continues to meet the users needs SEPA LVE SG offers a coordination platform impact of such scenarios on the good functioning to express requirements or proposals towards the in terms of liquidity efficiency, risk control and aimed at helping all involved parties to ensure of the STEP2 SEPA Services. EBA CLEARING Board of the Company and its Committees. the loss sharing arrangements. The FDG acts as that end-to-end processing of these volumes will conducted a review of the STEP2 Operational Pro- The STEP1 UAG is composed of representatives an advisory group to the Company s Board and take place in a reliable and stable manner. The cedures with the support of this group and brought from each country or grouping of users. Management. It is composed of representatives group is composed of representatives of banks temporary changes to the STEP2 operational from the treasury and operations departments that are direct participants in one or several emergency procedures in the last quarter of The STEP2 SEPA Business Working Group of EURO1 Participants that wish to make more STEP2 SEPA Services and wish to prepare for (SEPA BWG) serves as a forum in which direct use of the service. the exchange via STEP2 of large domestic SEPA The OPWG started its work in September 2013 participants in the STEP2 SEPA Services can dis- volumes on the sending and/or receiving end. and consisted of representatives from STEP2 cuss and provide feedback on issues and devel- The Risk Managers Forum (RMF) is geared at Direct Participants and the results of the discus- opments concerning these services. The SEPA fostering a risk dialogue between EBA CLEARING The Treasury and Liquidity Group (TLG) acts sions were presented to both the OTC and the BWG is formed by bank representatives of the and its service users. The RMF focuses on risk as an advisory group of experts to the Board STEP2 SEPA BWG. The group was dissolved on different national communities in SEPA. This issues related to clearing and settlement in and Management on issues relating to the use of 1 st February interim user forum will give way to more formally particular credit risk, liquidity risk, operational risk liquidity within EURO1. The TLG is composed defined user governance arrangements once both from a system design and a processing of representatives from the treasury departments The STEP2 SEPA Migration Forum s mission is SEPA migration has led to more stable usage point of view. It also looks into the implications of of EURO1 Participants. to exchange any information on practical and patterns in the STEP2 SEPA Services. regulatory risk management requirements. The operational issues experienced during the SEPA RMF is composed of Risk Managers from the migration process. The forum was kicked off in user banks with expertise and current responsi- November 2013 and is composed of representa- bilities for assessing risks related to the banks tives from the most active and critical STEP2 usage of financial market infrastructures, or users. It is expected that this group will be dis- related credit and liquidity risks. solved after the SEPA migration transition period ending on 1 st August / 42 eba clearing Report on Activities 2013 Governance and user groups 35 / 42 eba clearing Report on Activities 2013 Governance and user groups

19 The Board Chairman CHAIRMAN Deputy Chairman Kirstine Nilsson Paul Nixon Luis Pedro Simões Peter Vance Giorgio Ferrero Erkki Poutiainen Robert Heisterborg Swedbank HSBC Banco Espirito Santo Allied Irish Banks Intesa Sanpaolo Nordea Bank Finland (as of 23 rd May 2013) ING Bank Marie Cheval Emmanuel de Bouard Ivo De Meersman Thomas Egner Christian Narinda you Paolo Zanchi Daniela Dell'Arciprete Société Générale Société Générale (as of 23 rd May 2013) KBC Bank Commerzbank Westerhaus Deutsche Bank Crédit Agricole Banca Monte dei Paschi di Siena Intesa Sanpaolo (as of 13 th June 2013) José Luis Fernández Olli Kähkönen Fabio Stragiotto Hays Littlejohn Iglesias Nordea Bank Finland UniCredit UBS Banco Bilbao Vizcaya (as of 13 th June 2013) Argentaria 36 / 42 eba clearing Report on Activities 2013 The Board 37 / 42 eba clearing Report on Activities 2013 The Board

20 The Management EURO1/STEP1 Chief Executive Officer Britta Kotthaus Christine Roulin Jette Simson Roger T. Storm gilbert lichter Senior Advisor Senior Manager Maintenance and Procurement Bank Relations and Marketing Legal & Compliance Risk Management Project Management User Administration & Alan Taylor Caroline Neyrinck André Vink Office Corporate Secretariat Director General Counsel Chief Risk Officer David Blanchemanche Eric Charles (until 31 st March 2014) STEP2 Budget Finance Operations Communications Human Resources Accounting Eva Herskovicova Annick Moes Anne Rolland Nicolas Destree John Broxis Katja Heyder Erwin Kulk David Renault Director Marketing New Developments and Service Maintenance (until 31 st January 2014) Innovation and Procurement Offices Administration & Management Daniel Szmukler 38 / 42 eba clearing Report on Activities 2013 The Management 39 / 42 eba clearing Report on Activities 2013 The Management

21 Country Representatives Photography The photos in this report were taken in the Brussels and Frankfurt offices of EBA CLEARING in April 2014 and provide a snapshot of the dayto-day activities in these offices. Some of the pictures show EBA CLEARING Board and staff members participating in a meeting of the Strategy and Policy Committee (SPC) held on 9 th April The SPC is an EBA CLEARING Board Committee that focuses on addressing the longer-term positioning and development of EBA CLEARING. The SPC is Janina Grönholm Finland and Baltic Countries (as of 2 nd January 2014) Eva Herskovicova Czech Republic and Slovakia Katja Heyder Austria, Germany, Spain and Switzerland composed of EBA CLEARING Board members and is currently chaired by EBA CLEARING Deputy Chairman Robert Heisterborg (ING Bank). We would like to thank everyone who contributed to this photo project EBA CLEARING All rights reserved Concept and text EBA CLEARING Christine Roulin Belgium David Renault France Jette Simson Scandinavian Countries 40 rue de Courcelles F Paris Graphic design formfellows Kommunikations-Design Frankfurt am Main Photographs Michael Meinhard Bosse und Meinhard, Bonn Reproductions ORT GmbH Frankfurt am Main Alan Taylor Ireland and United Kingdom Daniela Vinci Italy André Vink The Netherlands Contact clearing@ebaclearing.eu 40 / 42 eba clearing Report on Activities 2013 Country Representatives 41 / 42 eba clearing Report on Activities 2013