Birth of the Single Euro Payments Area Benefits for US Corporations The information contained herein does not constitute and shall not be construed to constitute investment, tax or legal advice by Deutsche Bank AG or any of its affiliates, including Deutsche Bank Trust Company Americas nor its affiliates (collectively "Deutsche Bank").
1 SEPA the background 2 The first 6 weeks / next steps 3 Corporate impact and preparations 4 How a bank can help you SEPA page 2
What is SEPA? SEPA will be the area where citizens, companies and other economic actors will be able to make and receive payments in Euros within Europe, whether between or within national boundaries, under the same basic conditions, rights and obligations, regardless of their location (European Payments Council) SEPA page 3
SEPA Scope & New Payment Instruments Payment instruments and schemes Credit Transfers (28. January 2008) Direct Debits (2009) Card transactions Phase out of national mass payment schemes (by 201x) Orderer and beneficiary account located in the SEPA zone Legal Framework (European Commission) European Payment Services Directive Implementation into national law by November 2009 Market Infrastructure From 39 local systems to a small number of pan-european clearing houses (PE- ACH s) SEPA page 4
The SEPA area The European Union Euro Countries (15) Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain The European Union non - Euro Countries Bulgaria, Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Sweden, United Kingdom The European Economic Area Iceland, Liechtenstein, Norway and additonally Switzerland but -transactions only! SEPA page 5
SEPA changes at a glance (SEPA Credit Transfer and SEPA Direct Debit) New formats and standards Uniform ISO 20022 based SEPA xml format (mandatory for interbank use / recommended for client/bank interface) New data elements IBAN and BIC to replace national bank code and account number End-to-end data flow for Corporate process improvements: orderer reference field, full remittance information, uniform standards and codes for exception processes New processes Harmonized execution timelines Harmonized exception processes SEPA page 6
1 SEPA some background 2 The first 6 weeks / next steps 3 Corporate impact and preparations 4 How a bank can help you SEPA page 7
The first 6 weeks 28. January 2008: first settlement day for SEPA credit transfers 4000 + banks representing ca. 95 % of payment volumes adhered to scheme Wide reachability throughout Europe was achieved Only minor operational issues were quickly resolved Volume ramp-up after week 1 mainly intra-eu crossborder volumes Migration of local mass payments expected in the course of 2nd half 2009 when IBAN / BIC conversion tools are available to Corporates SEPA page 8
EBA Step2 SCT SEPA Processing per 18 February 2008 Number of Transactions processed per day Source: EBA Clearing, 02/2008 SEPA page 9
Next steps Full sender capability for credit transfers by all banks (2008) Implementation of the Payment Services Directive by the end of 2009 Bank individual developments of products and value added services around B-t-C and B-t-B direct debits (2008/2009) Launch and mass take-up of SEPA direct debit in 2009 / 2010 Additional services developed by European Payments Council to be launched 2009 onwards On behalf of Payments Online Payments Electronic Mandate submission and validation Decision on end date for parallel use of legacy / SEPA schemes to be taken SEPA page 10
Timelines before 2006 2006 2007 2008 2010 201x Procedures and technical set-up Development of SEPA Analysis / technical Testi Liveschemes and standards development ng Pilot Mass-Adaption and -Migration Products Development of basic services and VAS SEPA-wide competition Corporates are free to decide on timing of SEPA migration BUT: potential end date of parallel use of legacy / SEPA schemes to be respected SEPA page 11
1 SEPA some background 2 The first 6 weeks / next steps 3 Corporate impact and preparations 4 How a bank can help you SEPA page 12
Today: US Corporates with decentralized accounts & payment flows in Europe Corporate client Beneficiaries Beneficiaries Beneficiaries Beneficiaries EU/EEA countries SEPA page 13 Payment orders Beneficiaries Domestic Payments Situation today: Client sets up accounts in each EU country to initiate local payments in order to save x-border fees and have uniform handling / execution times
The future: single entry point into Europe with SEPA Corporate client With SEPA: Client only needs one account in EU to initiate SEPA payments with uniform standards and pricing SEPA countries SEPA page 14 SEPA payments (Intra EU/EEA + domestic ACH)
Strategic Opportunity - Current Corporate Market Trends Drivers Costs Reductions Risks & Control Trends Centralization Automation Standardization Results Centralized Treasuries SSC / Payment factories In-house Banks Single ERP/TMS Seamless IT interfaces Dematerialization of paper Straight-Through- Processing SWIFT for corporates XML formats SEPA page 15
and how SEPA helps Trends Centralization SEPA impact Less accounts needed across Europe Simplified centralization of liquidity Automation Easier reconciliation through end-to-end data flow Utilization of new data elements Standardization Simplified system configuration as local formats will be eliminated Harmonized Database One format for all of Europe (e.g. XML, CSV) SEPA page 16
The Corporate SEPA Checklist get prepared Analyse set-up of accounts and Cash Management structures in Europe benefits of SEPA for your company Decide on future structure of Cash Management structures; assess quick-wins vs. medium term developments Analyze operational and technical (system) impact of SEPA changes (formats / data elements / processes) assess implementation effort Collect IBAN and BIC from business partners and include own IBAN/BIC on invoices Choose a SEPA Bank with the most flexible solutions to help your transition and provide value added services in new environment Decide on SEPA migration timeline and approach SEPA page 17
1 SEPA some background 2 The first 6 weeks / next steps 3 Corporate impact and preparations 4 How a Bank can help you SEPA page 18
Deutsche Bank s SEPA Proposition The 4 Pillars The SEPA Initiative Payment Services Directive 1 2 3 4 Requirements & Timelines Business rules, standards & policies The Immediate European Financial Commission Benefits The Format European Central Flexibility Bank The Account European Payments Flexibility Council Transaction Services Consumers, Merchants, Corporates, and Public Administrations Realizing the Opportunity Minimizing the Efforts SEPA page 19
1. Immediate Financial Benefits to Corporates Elimination of the EUR 50,000 threshold (EU pricing Regulation on X-Border Flows) on accounts in the Euro-Zone All SEPA compliant non-urgent debits and credits priced at local ACH levels irrespective of: Transaction amount Format Access channel The SEPA Initiative Payment Services Requirements & Directive 1 Business rules, Timelines 2 standards 3 & policies ropean mission diate ncial efits The Immed Eur Finan Comm Bene ropean Centra al Bank mat bility Form Flexib The Eur The Acco Eur ount ropean Payments Flexib bility Council 4 Transac ction Servic ces Consumers, Merchants, Corporates, Realizing and the Public Opportunity Administrations Minimizing the Efforts Pricing Strategy providing tangible savings from Day 1 SEPA page 20
2. Format Flexibility Minimizing Corporate IT Investments EDIFACT, IDOC and CSV can be used to remit SEPA transactions: New format descriptions incl. SEPA data elements Conversion services planned for key local x-border formats XML Format Support: SEPA XML Format description available Global XML Format for Non-SEPA transactions The SEPA Initiative Payment Services Requirements & Directive 1 Business rules, Timelines 2 standards 3 & policies ropean mission diate ncial efits The Immed Eur Finan Comm Bene ropean Centra al Bank mat bility Form Flexib The Eur The Acco Eur ount ropean Payments Flexib bility Council 4 Transac ction Servic ces Consumers, Merchants, Corporates, Realizing and the Public Opportunity Administrations Minimizing the Efforts No obligation to invest in XML to benefit from SEPA Become SEPA compliant without even noticing it Minimizing the short term changes and investments for corporates SEPA page 21
3. Account Flexibility No need for additional or centralized SEPA accounts Initiation of SEPA transactions from accounts kept at all Deutsche Bank branches in the Eurozone and the UK No need to open new accounts for SEPA in addition to existing accounts for non- SEPA transactions (e.g. Checks) All transactions processed from the same accounts Major differentiator from other banking offers The SEPA Initiative Payment Services Requirements & Directive 1 Business rules, Timelines 2 standards 3 & policies ropean mission diate ncial efits The Immed Eur Finan Comm Bene ropean Centra al Bank mat bility Form Flexib The Eur The Acco Eur ount ropean Payments Flexib bility Council 4 Transac ction Servic ces Consumers, Merchants, Corporates, Realizing and the Public Opportunity Administrations Minimizing the Efforts Minimizing Corporate Efforts and Insulating from Change SEPA page 22
4. Value-Added Transaction Services Flexibility to support the client migration Deutsche Bank will provide a range of value-added services to insulate clients and realize the benefits of SEPA: Population of missing receiver s BIC (clients only need to send IBAN Deutsche Bank will derive and populate the corresponding BIC) Population of sender specific data (sender IBAN/ Originator ID / Creditor ID) Execution in Legacy format if beneficiary bank is not SEPA Reachable The SEPA Initiative Payment Services Requirements & Directive 1 Business rules, Timelines 2 standards 3 & policies ropean mission diate ncial efits The Immed Eur Finan Comm Bene ropean Centra al Bank mat bility Form Flexib The Eur The Acco Eur ount ropean Payments Flexib bility Council 4 Transac ction Servic ces Consumers, Merchants, Corporates, Realizing and the Public Opportunity Administrations Minimizing the Efforts Value-Added Transaction Processing Solutions to Ease the Migration to SEPA SEPA page 23
Comments and Questions The information contained herein does not constitute and shall not be construed to constitute investment, tax, or legal advice by Deutsche Bank AG or any of its affiliates, including Deutsche Bank Trust Company Americas nor its affiliates (collectively "Deutsche Bank"), nor shall this presentation or the content herein be construed as advice, an offer or a solicitation of any nature whatsoever nor is this article or its contents intended to be relied upon by any person. Individuals should consult with their legal advisor regarding their particular situation. Deutsche Bank is providing this article strictly for information purposes and makes no representation as to the accuracy, completeness, or timeliness of such information. Deutsche Bank shall not be held liable for the authentication of or compliance with the information contained herein nor does Deutsche Bank assume any obligation to update any such information. The views and opinions expressed herein or in any referenced document do not necessarily state or reflect those of Deutsche Bank or any of its employees, officers or affiliates. No part of this article may be copied or reproduced in any way without the prior written consent of Deutsche Bank. SEPA page 24