Irish Bankers' Federation - Competition Authority decision involving Euro changeover
Notification No. CA/8/01
Notification No. CA/8/01 – Irish Bankers’ Federation and Irish Mortgage and Savings Association / Euro Changeover Agreement
This decision concerns a Euro Changeover Operational Agreement (hereafter “the Agreement”) between the member institutions of the Irish Bankers’ Federation (hereinafter
‘IBF’) and the member institutions of the Irish Mortgage and Savings Association (hereinafter ‘IMSA’).
This decision concerns a Euro Changeover Operational Agreement (hereafter “the Agreement”) between the member institutions of the Irish Bankers’ Federation (hereinafter ‘IBF’) and the member institutions of the Irish Mortgage and Savings Association (hereinafter ‘IMSA’). In addition to matters agreed between the member institutions of IBF and IMSA, the Agreement contains recommendations of the IBF / IMSA Retail Operations Expert Group. The Agreement concernsoperational matters relating to the final changeover to the euro, or (in other words) the period during which the Irish pound is phased out as a sub-division unit of the euro and the introduction of euro notes and coins commences. The Agreement was notified by IBF and IMSA on 24 July 2001, with a request for a certificate under Section 4(4) of the Competition Act, 1991, or, in the event of a refusal by the Authority to issue a certificate, a licence under section 4(2) of the Act.
(a) The Subject of the Notification
2. The Agreement can be regarded as a response of IBF and IMSA, and of their member institutions, to a historic change in the Irish economy – the change of the national currency from the Irish pound to the euro, a currency which is shared, at present, with eleven other Member States. By virtue of the Treaty on European Union signed at Maastricht in February 1992 and subsequently ratified by EU Member States, and by virtue of Irish and European legislation, Ireland’s currency became the euro on 1 January 1999 when exchange rates were fixed between the National Currency Units of the participating Member States. Since then, the Irish Pound has been a subdivision unit of the euro.(1) The introduction of euro notes and coins is to commence on 1 January 2002, (2) and the period of dual circulation is to continue in Ireland until 9 February 2002. (3) As a matter of European law, the transition must be completed by 30 June 2002.(4)
3. The notified Agreement deals with the coordinated phased withdrawal of handling by the member institutions of IBF and IMSA of the ‘legacy currency’, i.e. the Irish pound, in all its forms, such as cash, cheques, and electronic transfers. A recurring feature of the arrangements set out in the Agreement is the fixing of dates after which instruments of exchange/transfer denominated in Irish pounds will not be accepted. The arrangements cover a variety of subjects related to the euro changeover, such as technical and administrative matters and communication with customers.
(1) Section 24 of the Central Bank Act, 1989 as amended by Section 6(1) of the Economic and Monetary Union Act, 1998 reads as follows.
24. By virtue of Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the euro, from the 1 st day of January, 1999 –
(a) the currency of the State is the euro, and(b) the Irish pound unit (within the meaning of theEconomic and Monetary Union Act, 1998) is a subdivision of the euro.(2) Article 15 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro.(3) Irish Pound Notes and Coins (Cessation of Legal Tender Status) Order, 2001 ( S.I. No. 313 of 2001), made under section 9(1) of the Economic and Monetary Union Act, No. 38 of 1998.(4) Article 15 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro.(b) The Parties
4. IMSA is a trade association which represents the interests of building societies and mortgage lending institutions in Ireland. IMSA is affiliated to the IBF. IBF is a trade association which represents banking institutions in Ireland, including licensed banks, savings banks, and banks and subsidiaries of banks operating in the International Financial Services Centre in Dublin. Both trade associations operate from Nassau House, Nassau Street, Dublin 2.
5. The member institutions of IBF and IMSA provide various financial services and include most of the main financial services institutions in the State. According to IBF figures, “the combined contribution of IBF-member banks to the Irish economy accounted for 3.5% of Gross National Product in 1998.” The member institutions of IBF and IMSA are listed in Annex 1 to this decision.
(c) The Product and the Market
6. The products and services affected by the agreement include: bank accounts denominated in ‘legacy currencies’ (i.e. the former currencies of euro-participant states); cheques and other currency instruments denominated in legacy currencies; domestic drafts; electronic funds transfers (“EFTs”); Automated Teller Machines (“ATMs”); debit (‘Laser’) cards.
7. The parties submitted that the relevant market is the market in the State for provision by banks and building societies of bank account, money transfer services This definition of the relevant market may be too broad and it is likely that several discrete markets may be defined within the financial services sector. For the purposes of this decision, however, the Authority has decided that it is unnecessary to make a final determination on this point. Regardless of whether the market(s) should be defined in the manner submitted by IBF and IMSA, or in a different manner, the Authority’s assessment of the Agreement would not change.
(d) The Notified Arrangements
8. The Agreement was prepared by the “IBF/IMSA EMU Retail Operations Expert Group” and includes various commitments that have been entered into by the member institutions of IBF and IMSA in relation to operational matters (excluding the introduction of euro notes and coins, but including matters relating to Automatic Teller Machines (ATMs)) affected by the final changeover to the euro on 1 January 2002. It also includes a number of recommendations of the IBF/IMSA Expert Group in relation to the changeover.
9. IBF/IMSA member institutions agree that all legacy currency bank accounts in Ireland not already re-denominated prior to the Changeover Period (defined in the Agreement as the period stretching approximately from close of business on Friday 28 December 2001 to start of business on Wednesday 2 January 2001) will be automatically re-denominated (in euro) during the Changeover Period and that no bank will continue to offer legacy currency accounts after the Changeover Period.
10. The member institutions also agree that customers should be strongly advised that 31 December 2001 is the latest date on which they should write cheques denominated in Irish pounds; that 30 June 2002 will be the last date on which a collecting bank will accept Irish pound cheques or any other Irish pound payment instruments (with the exception of bank drafts) for processing; and that paying bankers will not pay Irish pound cheques, whether they have been presented through the inter-bank clearing or payment systems or otherwise, which have been accepted by a collecting bank after 30 June 2002 (and accordingly that no bank will issue cheque books denominated in Irish pounds after the Changeover Period). It is also agreed that 15 February 2002 is to be recognised as the last date on which a bank will accept an instrument drawn in any other legacy currency for processing within a
cross-border cash letter service. Individual institutions will continue to make their own arrangements with their overseas agents for the clearance of such instruments after 16 February 2002.
11. It is agreed that no member of IBF or IMSA will issue Irish pound bank drafts or gift cheques after the Changeover Period, but that members will continue to accept Irish pound bank drafts drawn on any Irish financial institution as such drafts have no expiry date. Irish pound bank drafts collected after 30 June 2002 will be processed “on a special presentation basis”.
12. The Agreement states that “on the basis that all member institutions of IPSO have agreed to cease processing Paper Direct Debits prior to 1 January 2002, no allowance will be made for euro Paper Direct Debits before, during, or after the Changeover Period.” It should be noted that the “OTC (over the counter) Initiative” that is the proposed withdrawal by certain retail banks of counter paper based utility and other bill payment services, has been notified to, and is under separate consideration by the Authority
13. The member institutions of IBF and IMSA agree that, on and from 28 December 2001, all inter-bank electronic fund transfer (“EFT”) transactions (including unpaid debits) will be exchanged in euro; that it is the responsibility of the originator’s bank to convert to euro any EFT payments originating in Irish pounds which will be exchanged on or after 28 December 2001 before exchanging with other banks; that the resolution of errors arising due to an Irish pound denominated file being processed as a euro-denominated file will be the responsibility of the originator and his bank; that it is the responsibility of the originator’s bank to ensure that warehoused transactions accepted in Irish pounds prior to 28 December 2001, and which will be exchanged on or after 28 December 2001, have been converted to euro before they are exchanged with other banks.
14. It is also agreed that all inter bank ATM transactions will continue to be denominated solely in Irish pounds until the initiation of a ‘clean-break period’ shortly after midnight of the 31 December 2001. After the end of the ‘clean-break period’...
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