Bundesbank Concerned About Payment Jams on Euro Deadline

German companies risk clogging payment transactions if they don’t adapt to new transfer standards on time, according to Bundesbank board member Carl-Ludwig Thiele.

“I am concerned that many payments won’t be processed” once a Feb. 1 deadline hits, Thiele said in an interview yesterday, referring to the date by which all transfers and direct debits in the Single Euro Payments Area will have to follow a common technical standard. “I’m afraid we’ll see the build-up of a bow wave, which will then have to be reduced gradually, transaction by transaction.”

German companies are lagging behind their European peers in adjusting payment practices. While 47 percent of transfers and 3.7 percent of direct debits in the euro area followed SEPA standards in June, companies in Europe’s largest economy used SEPA rules in only 8.7 percent and 0.1 percent of those transactions, respectively, in the first quarter. The Bundesbank said data didn’t change much in the second quarter.

“Banks must start communicating and increase awareness of the problem,” Thiele said. The Bundesbank will spend 3 million euros ($4 million) on a campaign starting this autumn to promote the new requirements.

Initiatives include applying for a creditor ID at the Frankfurt-based central bank to collect money directly out of bank accounts and inform customers about the shift to SEPA.

33 Countries

Almost one quarter of the 213 trillion euros transfered in the European Union in 2011 originated in Germany, while the country accounted for almost three quarters of the 18 trillion euros collected via direct debits.

Germany’s reliance on direct debits, a common method of payment, make the switchover for banks and businesses more complex and time-consuming.

SEPA enables customers to make euro transfers across borders within Europe using a single payment account and a single set of payment instruments. Thirty-three European countries are participating in SEPA, a project initiated to promote a single market for bank transactions. Adherence to the new standard is mandatory from Feb. 1.

“That’s the law and it won’t change,” Thiele said. “There is no ‘Plan B’.”

German banks have begun contacting customers to make the changeover as smooth as possible.

“After all, the banks are the ones who have to convince citizens to shift to the politically-driven payment standard,” Axel Schindler, who’s responsible for payment transactions at the federal association for German cooperative banks in Berlin, said by telephone. “At the moment, we expect that all our customers will have shifted to SEPA on time.”

Before Christmas

While small-business owners should be able to handle the change by updating bank software and converting master data “just before Christmas” at the latest, according to Schindler, larger companies will need longer transition periods.

Kloeckner & Co SE has already started to change its information technology systems, and plans to be finished before the end of the year, Christina Kolbeck, a spokeswoman for the Duisburg, Germany-based company, said by telephone.

Still, banks are bracing for the worst case.

“Companies could be technically unable to transfer or receive payments,” Dirk Braun, director for cash management and international business, at Commerzbank AG in Frankfurt said by telephone. “In the worst case that could lead to a temporary liquidity squeeze for the German economy.”

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