EU To Regulate Cross-Border Settlements
Cross-border payments and securities trading initiatives within the EU are progressing, with the pan-European ACH, Step2, in talks about linking its system to the global SwiftNet network, and the issuing of a EU directive to eliminate regulatory hurdles that obstruct lower-cost cross-border securities trading. The investment by US firms in Europe, and vice versa, is driving banksÆ use of SwiftNet as a way to transmit low-value, recurring payments. To this end, Step2 and its US peer, the Electronic Payments Network, have since last month allowed affiliated banks to use SwiftNet to connect to their clearinghouses.Before connecting to SwiftNet or Step2, however, US banks are required to screen transactions against terrorist lists, as advised by the Office of Foreign Assets Control and the Financial Crimes Enforcement Network. Approximately 37 per cent of the worldÆs banks are connected to SwiftNet, with the remainder expected to link up by end-2004. With regard to Step2 participation, the EBA Clearing Company expects 19 banks in new EU member states to join Step2 in May as indirect participants after the accession date of May 1, to complement the 120 existing indirect participants, and 59 direct participants.
As the EU enlarges in the next 12 to 16 months, uptake of the Step2 venture and cross-border securities initiatives is predicted to increase. The EUÆs lack of a common regulatory or supervisory framework for clearing and settlement impedes current cross-border activity, according to a release, while making cross-border clearing and settlement ôpotentially less safeö. A pan-European legislative framework is to be defined, to liberalize existing securities clearing and settlement systems and increase cross-border transactions, which in turn will highlight the activities of Step2 and the Pan-European Direct Debit scheme. Related Links:
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