Written Answers. - Currency Charges.
Noel Ahern
Ceist:
153
Mr. N. Ahern
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
the commission banks and financial institutions which can currently charge for currency within euro countries; if 2.5 per cent is the standard approved charge; if there is any competition in the market; the way in which this 2.5 per cent compares with the rate applying in other euro countries; the discussions, if any, at EU level to reduce, control or co-ordinate rates; the commission, if any, which will apply in 2002; if euro notes will be valid in shops and hotels in other euro countries or subject to exchange charges; if she will instruct banks and financial institutions to display rates of exchange in their premises; and if she will make a statement on the matter.
[17654/99]
The issues raised by the Deputy extend in some instances beyond Ireland to the eurozone generally. It may, therefore, be helpful for me to address them by distinguishing between the regulatory framework in relation to introduction of the euro and bank charges which exists at both EU and national level.
At EU level, the European Commission issued a recommendation 98/286/EC in April 1998 on banking charges for conversion to the euro. The financial institutions in Ireland adopted this recommendation through a standard of good practice which their representative organisations agreed in late 1998 and which was incorporated into the third edition of the national changeover plan. At end 1998, the Commission made public an initial evaluation of the response of the European banking associations to its recommendation. The report gives a summary of the situation in each EU member state participating in the euro – which is one of the issues of interest to the Deputy – as well as an overall picture for each of the four Europe wide associations who were asked to provide information. The report may be downloaded from the EU website, the address of which is: europa.eu.int.
On 5 February 1999, the Commission issued a statement calling on banks and other financial institutions in the eurozone to further increase transparency by making publicly available information showing changes in the total level of charges, before and after introduction of the euro, for exchanging eurozone banknotes and crossborder cheques, transfers and card payments. Banks were requested to report the state of play to the Commission through their European associations. The Commission called as well on customers of financial services to report details of any cases of banks' failure to respect the legal framework for the euro or the Commission recommendation, through the following contact points:
Fax:+32/2/295.07.50 (DG XV)
+ 32/2/296.56.08 (DG XXIV)
E-mail:europoint@dg15.cec.be
eurosignal@dg24.cec.be
The Commission has also created the Quest database to serve as the reference document for answering questions from EU citizens on the euro. They are encouraged to send questions via the euro Internet site at: http://europa.eu.int/euro/
Within the past few months, the Commission has launched investigations into possible infringements of EU competition rules as regards charges by banks in certain participating member states. On the question of credit transfers, the Commission recognises that there are still substantial differences in the level of charges for crossborder transactions within the eurozone as compared to domestic ones, due to weaknesses in crossborder payments infrastructure and the need to remove other structural obstacles to crossborder competition. It is in this context that the Commission is preparing a communication to the member states on payment systems in the Single Market. Action in this area is essential to enable the single currency to achieve its full potential.
At national level, under the Consumer Credit Act 1995, the Director of Consumer Affairs has statutory responsibility for the regulation of charges proposed by banks and other financial institutions. These institutions were obliged to follow the notification procedure to the director, as laid down in the Act, for euro-specific charges envisaged, prior to introduction of the euro for non-cash transactions as from 1 January 1999. The director, in turn, issued separate directions under the Act with regard to the commission which the financial institutions could charge for transactions in eurozone currencies. The director made a presentation in this connection to the Joint Oireachtas Committee on European Affairs on 16 February 1999 and, as I understand it, informed the European Commission as well.
Summarising the information made available by the director, by reference to the issues raised by the Deputy, the director's directions to each of the financial institutions concerned:specified maximum charges which the financial institutions could apply – they are obviously free to charge less; did not set a standard charge, mindful of the need to encourage competition – and I am advised that a number of charges have been reduced by certain financial institutions since the directions were issued;have meant savings on average of between 20 per cent and 30 per cent on the cost to customers transacting in eurozone currencies as compared with the cost of such transactions prior to introduction of the euro, through insisting that the benefits of elimination of exchange rate risks be passed on to customers; required the financial institutions to inform customers by advertising their eurozone transaction charges in the national newspapers both prior to and immediately after introduction of the euro, producing information leaflets, to be available in branches to customers, detailing the euro specific charges, and giving representative examples of the charges for different transaction values and displaying the euro rates of exchange – as agreed by ECOFIN on 31 December 1998 – in the premises.
I am assured by the Director of Consumer Affairs that she is monitoring compliance with her directions by the financial institutions.
On the question of commission, introduction of the euro and the fixing of exchange rates have made the situation much more transparent – and transparency intensifies competition. Prior to 1 January 1999, financial institutions applied two charges to customers, the commission charge and the spread, i.e the difference between the buying and selling rate for the currency. The spread charge was essentially hidden, as the rate quoted to a customer included a margin in favour of the institution. Since 1 January 1999, financial institutions are no longer able to calculate their charges within an exchange rate spread for transactions involving the currency units of participating member states – they may now apply a single commission charge only for eurozone transactions.
Finally, when the euro replaces the national currencies of participating member states in 2002, notes and coins in the eurozone will represent one and the same currency – the euro. They will thus be valid throughout the eurozone in shops, hotels, etc. Irish consumers travelling within the eurozone will not have to change currency, as they do at present, so the question of commission charges will not apply.
