28 August 2013
‘Germany risks temporary liquidity squeeze’
It is no secret that Germany is Europe’s largest economy. What most people are unaware of is that the country accounts for almost three quarters (!) of the 18 trillion euros that are collected via European direct debits annually. With this in mind, the words from Carl-Ludwig Thiele, board member of the German Bundesbank, may sound alarming, “I am concerned that many payments won’t be processed,” he warned during an interview.
Contrary to what one might expect, German organisations are lagging behind in adjusting processes and practices to the Single European Payments Area (SEPA). Only 8.7 per cent of transfers and 0.1 per cent of all direct debit transactions in Germany were SEPA-proof in the first quarter of 2013, compared to 47 per cent of transfers and 3.7 per cent of direct debit transactions in the Euro area. This it has not changed much in the second quarter, according to the Bundesbank.
The country’s reliance on direct debits seem to be the bottleneck, because it makes preparations more complex than for example in Finland, which hardly relies on SDD. Jochen Metzger, head of the payments and settlement systems department at Deutsche Bundesbank, explained the complexity of SDD in Germany on this blog in January:
“SEPA Direct Debit (SDD) is quite similar to the German scheme, but not the exact same. For a long time there was no answer to the question of how collection authorisations pre-issued for execution via the German direct debit scheme (“Einzugsermächtigungslastschriftverfahren”) could be adapted for use as the SEPA direct debit mandate. The Federal Court of Justice outlined a way forward for the banking industry to convert existing collection authorisations and thus making them compatible with the SEPA direct debit mandate. […] The banking industry made the necessary changes to its sector’s general terms and conditions and these modified conditions became effective on July 9th 2012. The concerns of some important users of the direct debits have therefore been relieved.”
To speed up the process, the Bundesbank will invest three million Euros on a campaign to promote the SEPA requirements to the German public. According to a spokesperson of Commerzbank (who was quoted by Bloomberg), it might be too late. At the current adoption pace, “companies could be technically unable to transfer or receive payments. In the worst case that could lead to a temporary liquidity squeeze for the German economy.”