The basic aim of SEPA is as contained in the relevant Regulation of the European Parliament dated 14.02.2012:
"The creation of an integrated market for electronic payments in euro, with no distinction between na-tional and cross-border payments is necessary for the proper functioning of the internal market. To that end, the Single Euro Payments Area (SEPA) project aims to develop common Union-wide payment services to replace current national payment services . As a result of the introduction of open, common payment standards, rules and practices, and through integrated payment processing, SEPA should provide Union citizens and businesses with secure, competitively priced, user-friendly, and reliable payment services in euro."
SEPA defines processes and formats for processing bulk payments in euro and functions on the basis of the standard XML, eXtended Markup Language, standardised payment instruments and harmo-nised legislation. The above-mentioned EU Regulation was adopted in February 2012. It calls for a conversion of payment services in the SEPA countries by 01.02.2014 (there are longer changeover periods for non-euro countries).

Card payments in SEPA

Under the motto, "any card in any terminal - under the same conditions", the harmonisation of national card procedures is already well developed.

Credit Transfers in SEPA

SEPA credit transfers have been possible since 28 January 2008. The changes to existing credit transfers are on the one hand of a technical nature (transition of data format from DTA to XML), on the other hand they lie in the key identification data of the account and the bank managing the account; account number and bank code are replaced by IBAN and BIC, already familiar in international bank transactions.

• There are no payment ceilings.
• The initial processing period of a maximum of three days was reduced to one day as of 01.01.2012.
• Irrespective of the the payment amount, the conditions are those of domestic payments as from April 2012.
• Sums exceeding € 12,500 must still be reported to the authorities pursuant to section 59ff of the German Foreign Trade and Payments Regulation. The notification must be made by the recipient/payer. More information on the AWV and on the forms to be used are to be found on a Internet page of Deutsche Bundesbank.
• The following countries are reachable for credit transfers within the EU/EEA, to Switzerland and Monaco: Austria (AT), Belgium (BE), Bulgaria (BG), Saint-Barthelemy (BL), Cyprus (CY), Czech Republic (CZ), Denmark (DK), Estonia (EE), Finland (FI), France (FR), French Guyana (GF), Germany (DE), Gibraltar (GI), Great Britain (GB), Greece (GR), Guadelope (GP), Hun-gary (HU), Iceland (IS), Ireland (IE), Italy (IT), Latvia (LV), Liechtenstein (LI), Lithuania (LT), Luxembourg (LU), Malta (MT), Monaco (MC), Saint-Martin (MF), Martinique (MQ), Netherlands (NL), Norway (NO), Poland (PL), Portugal (PT), Saint-Pierre and Miquelon (PM), Reunion (RE), Romania (RO), Slovakia (SK), Slovenia (SI), Spain (ES), Sweden (SE), Switzerland (CH).

Aareal Bank clients can initiate SEPA credit transfers in three ways:

1. by despatch of the order data via BK01 Kom, the Aareal account portal or via EBICS,
2. by recording of the order data directly in their BK01-licensed ERP system where that func-tionality has already been implemented,
3. via submission of the corresponding form to the bank.

Credit transfers to other countries that do not permit processing using SEPA (e.g. payments in foreign currency or credit transfers to non-SEPA countries), can be instructed using form F1 (payment order in external payments) Customers of Aareal Bank can request forms for international transfers (Z1 and SEPA) from their respective branches.

Direct debits in SEPA

The user of the SEPA direct debit is faced with further structural and processual changes to that procedure, which had been rolled out in Germany at the end of 2009. The payee is obliged to inform the payer at least 14 days before the payment date and amount, of the direct debit. It suffices for regular bookings to inform the payer once only in advance of the first direct debit, quoting future due dates.  The payment is then presented to the payer's bank at least two days before the due date. The payee must supply the due date and the order information along with the payment mandate.

This procedure is more complex than current procedures but has advantages:

• Security:
  The executing banks have an unambiguous mandate reference and the two parties have an unambiguous contractual reference. This also increases security as the agreement is already necessary for one-off payments.
  In addition, and insofar as the payer is classed legally as a consumer (which concerns e.g. homeowner associations), it enjoys comprehensive rights to block individual direct debits and to agree with its account-keeping bank negative or positive payee lists; the level of the pay-ment amount; periodocity.
• Reachability and uniformity:
  the SEPA direct debit enables cross-border collections to be processed for the first time.

The transition  to the SEPA direct debit is facilitated in two other ways:

1. A legally-secure migration path to the SEPA direct debit mandate has been developed for pre-existing direct debit authorisations in writing that have been presented to the payee.
2. The SEPA direct debit the standard format of which is designated CORE is being supplemented with the addition of an optional COR1 form. COR1 is more similar to the current German direct debit authorisation inasmuch as the minimum CORE presentation period of 2 to 5 days is cut to 1 day. Many payment system participants prefer COR1 particularly for intra-German direct debits and gear their investments and system adjustments to COR1. The Deutsche Kreditwirtschaft (DK) is currently reviewing and drafting pre-requisites for Germany-wide implementation and reachability of the SEPA direct debit with reduced presentation period.
   It is expected that COR1 will become the new direct debit standard in payments within Germany. CORE would then become relevant for cross-border payments. Other SEPA countries are interested in implementing COR1.

A short SEPA roadmap

• 2006: credit institutions began implementing the prerequisites for realising SEPA.
• 28.1.2008: SEPA credit transfer was introduced and offered in parallel with national payment products.
• November 2009: SEPA direct debit was introduced and offered in parallel with national pay-ment products.
• 14.02.2012: the EU Regulation for mandatory transition to the SEPA procedure is adopted by the European Parliament.
• Probably April 2012: the EU Regulation will be going into force in Germany upon publication in the Federal Gazette.
• Probably 2012: German implementation law for the EU Regulation on special provisions in Germany will be going into force.
• On 01.02.2014, the previous procedures are scheduled to be turned off.

Interesting special provisions

• IBAN-only:
  customer orders to a given bank can be placed as from February 2014 citing the IBAN only (while waiving the BIC), because the IBAN already contains the bank code. However, the roll-out of this system may be postponed to a later date in Germany. For cross-border payments, IBAN-only will be available as from February 2016.
• Special migration for standing orders:
  in contrast to the legally-secure changeover from written direct debit authorisations to SEPA direct debit mandates, there will be no migration path for standing orders. Standing orders are going to receive a SEPA equivalent in the Business-to-business (B2B) direct debit. The DTA standing order direct debit will also be ending on 01.02.2014 and may then not be collected absent presentation of a new mandate.  It is recommended that new mandates be obtained in good time. Note that the B2B direct debit can be used only for collection between corpora-tions. If a consumer i.e. a tenant or a homeowner association is involved in the payment, only the SEPA-CORE procedure can be used (see above).

SEPA in Aareal Bank

1. Aareal Bank is extensively prepared for the requirements and possibilities of SEPA. The XML data format as well as the new identification numbers, IBAN and BIC, have been standardised in SEPA.
2. Since the official start on 28 January 2008, Aareal Bank is a listed SEPA participant and proc-esses incoming and outgoing SEPA credit transfers (active and passive SEPA credit transfer). SEPA direct debits are also accepted and processed (SEPA passive direct debit). Aareal Bank customers may mandate SEPA direct debits as from November 2012.
3. The BK01 interfaces to the ERP systems are or will be prepared successively for SEPA so that it will be possible to generate and transact SEPA payment services in cooperation with the ERP systems and the account management system.

Brochure SEPA