Payments in Europe, the SEPA IBAN Only Rule and 2016 1

There has been quite a lot of discussion recently about the SEPA IBAN Only rule, and with it some confusion too. So in this post i thought i would try and take the complexity (for corporates) out of the IBAN only rule by providing a simple question and answer guide…..

1. What is the SEPA IBAN Only Rule?

For SEPA payments the IBAN only rule means that you don’t need to specify both the IBAN and the BIC, the IBAN alone will suffice. Easy right….?!?!

2. What are the IBAN Only Rule Deadlines?

The SEPA Regulation (260/2012 which put a deadline on euro payment harmonisation in Europe) states that both the IBAN and BIC value must be indicated until:

• 1st August 2014 – After this date national SEPA payments do not require the BIC value
• 1st February 2016 – After this date ‘cross border’ SEPA payments to not require the BIC value

3. Why don’t we need to indicate the BIC ?

In short, payment service providers are able to derive the BIC (for routing purposes) from the IBAN

4. Whats the point of the SEPA IBAN Only Rule?

The idea is to simplify the amount of information that people and companies need to provide. This should reduce the number of processing errors resulting in improved straight through processing rates at the bank. For corporates. many experienced a lot of problems with failed payments because the wrong BIC value was being indicated – check out the post A Must Visit Website for any SEPA Implementation to remind yourself of some of the headaches we had…

5. Why am i hearing so much about the SEPA IBAN Only Rule now?

Couple of reasons:

• 1st February 2016 SEPA Deadline is approaching – after which cross border payments wont require the BIC
• From 31st October 2016 the EU – incorporating the non-SEPA zone – will need to ensure that any EURO payments are SEPA compliant. But the preparation starts now..!
• For the UK based IBAN’s, Payments UK has delivered a SEPA Payment Portal solution that will determine the BIC for routing purposes – this has been featured in quite a few headlines. Payments UK are calling their solution SEPAIO (SEPA IBAN Only) directory
  • By the way, the Payments UK solution leverages the SWIFTRef platform

6. Will ALL of my non-SEPA Zone euro Payments Need to be SEPA Compliant after October 2016?

Confirm this with your bank. But in a nutshell:

• Any euro payments (submitted through a bank proprietary format for example) from within the SEPA countries will need to be SEPA compliant – that is submitted using ISO20022 XML
• But submitted messages such as MT101 or MT103 that are processed through high value clearing channel will NOT need to be converted into ISO20022 XML
  • You need to check this with your bank though. In some instances your bank may be converting the payments into the SEPA XML format for you, in which case you will need to convert the MT101 or MT103 messages into SEPA XML

Let me know if you have any other questions, and i will add them to the above!

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