EBA Clearing Report on Activities 2011 - Overview

REPORT ON ACTIVITIES 2011Practitioners creating Europe-wide payment infrastructures

March 2012

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About the cover art Building connections for the future takes vision, know-how and passion. Sustainable infrastructures are de-signed to efficiently channel traffic flows, mitigate risks and flexibly adapt to changing usage patterns and re-quirements. EBA CLEARING is pleased to present to you selected design studies on public transport hubs for the city of the future, created by Atelier d’Architecture et de Design Jim Clemes s.a.

Photography The photos in this report were taken in the Paris and Brussels offices of EBA CLEARING. We would like to thank everyone who participated in this photo project.

REPORT ON ACTIVITIES 2011

EBA CLEARING

Overview 2011

EURO1 Service

STEP1 Service

STEP2 Platform STEP2 SCT ServiceSTEP2 SDD Core and B2B ServicesSTEP2 XCT ServiceSTEP2 ICT Service STEP2 IET Service

MyBank e-payment initiative

System performance, maintenance and enhancements

Resilience, information security andbusiness continuity management

Customer support

Outlook 2012

Board Committees, User Advisory Groups and Working Groups

The Board

The Management

Country Representatives

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EBA CLEARING REpoRt oN ACtIvItIEs 2011 3

EBA CLEARINGCost-saving infrastructure solutions for anintegrated euro payments environment EBA CLEARING is a bank-owned provider of pan-European payment infrastructure solutions. Estab-lished in 1998 by 52 banks, the Company had 65 shareholders by March 2012. The mission of EBA CLEARING is to offer efficient and cost-effective so-lutions in the co-operative space, which generate savings within its user banks.

EBA CLEARING is the leading private sector pro-vider of pan-European payment services in euro. It owns and operates EURO1, a large-value pay-ment system with an RTGS-equivalent net settle-ment arrangement, and STEP1, a single payment system for small and medium-sized banks, as well as STEP2, a Pan-European Automated Clearing House (PE-ACH) platform processing retail credit transfers and direct debits. By March 2012, close to 300 banks across Europe were directly connected to the services offered by EBA CLEARING.

The Company is also working on pan-European so-lutions in the e-payment area. MyBank, an online banking based e-authorisation service, will start into its technical pilot phase on 4th June 2012.

Through regular user group meetings as well as information and training sessions, both at Europe-an and country level, EBA CLEARING entertains a direct and intensive exchange with its user com-munity. This user-centred approach has forged the Company’s unique market responsiveness as a co-operative and country-neutral undertaking in a fast changing environment.

In co-operation with the Euro Banking Association, EBA CLEARING takes an important part in the bank-ing industry’s efforts to create, maintain and evolve an integrated pan-European payments environment meeting the needs of the banks and their customers in the Single Euro Payments Area (SEPA).

EBA CLEARING REpoRt oN ACtIvItIEs 20114

Overview 2011

Over the past year, the pan-European infrastruc-ture solutions of EBA CLEARING affirmed their key position in the European payments industry, pro-viding efficient and reliable services to the Com-pany’s large user community across the continent. The services proved to be crucial components of the banks’ strategies for successfully dealing with the key challenges of 2011 and preparing for future challenges.

By supporting banks in maximising their liquidity usage and minimising risk, the EURO1 system was of major value to its participants in a year that was again marked by considerable liquidity constraints and increasing risk concerns in the market. The sound and smooth operation of the system was reconfirmed in 2011 in the oversight assessment conducted by the European Central Bank.

STEP2 reinforced its position as a cornerstone of the industry’s SEPA migration strategy: EBA CLEARING’s PE-ACH accounted for over a third of the SEPA Credit Transfers channelled through CSMs. The platform attracted further domestic volumes in 2011, as the Finnish community com-pleted the migration of its credit transfers to STEP2 SCT and a dedicated Irish Transfer Service was launched for Irish legacy retail payments. STEP2 also provided banks with an easy and cost-effective way to implement D+1 end-to-end service levels, which the Payment Services Directive made man-datory from 1st January 2012 on.

As a result of an extensive consultation with its users, EBA CLEARING took a number of important steps in 2011 to further evolve its services in line with their future needs as well as with the regulato-ry and oversight outlook. The EURO1 Review and

Reform Program saw a first set of deliverables im-plemented throughout the year, which were geared at further improving the participants’ liquidity recy-cling and credit risk management capabilities.

Preparations were made on the STEP2 platform to equip the SCT Service with additional settle-ment cycles in February 2012 and a batch pro-cessing functionality in April 2012. These enhance-ments tied in with the Company’s ongoing efforts to prepare the STEP2 SEPA Services for the con-siderable pick-up of domestic traffic expected in the run-up to the SEPA migration end-date. EBA CLEARING launched the SEPA Large Volume Ex-change Project in late 2011 to ensure readiness for the SEPA ramp-up phase both at the level of the senders and receivers of large domestic volumes and at the level of STEP2.

The Company also continued its efforts aimed at further strengthening the operational robustness of its services by reinforcing the underlying organisa-tional structure and processes. Following the cre-ation of a dedicated Unit centralising Information Security and Business Continuity related matters, the Company rolled out an Information Security Management System over the past year.

In September 2011, EBA CLEARING put in place a risk management function, including the creation of a Board Risk Committee. The Committee assists the Board in fulfilling its oversight responsibilities with regard to the risk appetite of the Company and the risk management and compliance framework.


EURO1: average daily volume of payments processed

200,000

250,000

150,000

2009 2010 2011 2012100,000


KEy fACTS ANd fIGURES (status: March 2012)

fUNCTION RTGS-equivalent large-value payment system on a multi-lateral net basis, for single euro transactions of high priority and urgency, and primarily of large amount

LIvE dATE 4th January 1999

TEChNICAL OPERATOR SWIFT

AvERAGE dAILy vOLUME 248,163 transactions

AvERAGE dAILy vALUE EUR 245 billion

LEGAL BASIS • Single Obligation Structure (SOS) recognised and

enforceable in every EU jurisdiction and OECD juris dictions outside the EU where participants have their registered Head Offices

• Compliant with the 10 Core Principles for Systemically Important Payment Systems (SIPS)

• Overseen by the European Central Bank

PARTICIPATION 65 Participants / 50 Sub-Participants

REACh Close to 10,000 participant BICs and over 20,000 additional BICs reachable via EURO1/STEP1 Participants as listed in EURO1/STEP1 Directory

ENd-Of-dAy SETTLEMENT in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2011/2012 • Volume rise of 5.5 percent in 2011, including a new

all-time volume record with 260,978 payments processed on average per day in December 2011

• EURO1 Review and Reform Program successfully kicked off in 2011 with liquidity and credit risk management enhancements

EURO1 Service

A compelling combination of high liquidity efficiency and minimal credit riskEURO1 proved to be a very helpful tool for banks over the past year in the face of rising liquidity cost and credit risk constraints. Combining a high level of liquidity efficiency and low levels of collateral with sound settlement and counterparty risk man-agement mechanisms, the service was well-placed to support banks in their efforts to maximise their liquidity recycling capacity and minimise risk expo-sure. EBA CLEARING continued to enhance the EURO1 platform in both of these key areas through-out 2011 as part of the EURO1 Review and Reform Program.

On the rise: volumes and values in EURO1The attractiveness of the EURO1 offering was reflected in the rise of the average daily volumes service volumes in 2011 by 5.5 percent. The daily average value increased by 4 percent and stood at EUR 249 billion throughout the year.

December 2011 saw an all-time record with 260,978 payments processed on average per day, which was 13.6 percent up on the previous month and con-siderably surpassed the previous peak of 249,042 back in March 2008. This significant increase was partly a result of the closing down of the STEP2 XCT Service on 5th December 2011.

Wide reach: 30,000+ BICs across the world addressable through EURO1/STEP1 ParticipantsThe number of EURO1 Participants and Sub-Par-ticipants slightly decreased in 2011 and early 2012, due to mergers and other market consolidation pro-cesses. By the end of March 2012, EURO1 counted 65 direct participants and 50 sub-participants, rep-resenting close to 10,000 participant BICs.

In addition, over 20,000 identities were addressa-ble via EURO1/STEP1 Participants or Sub-Partic-ipants based on the EURO1/STEP1 Directory. To-gether with SWIFT, EBA CLEARING has started a project to enhance the functionality and usage of the EURO1/STEP1 Directory.


Positive assessment: EURO1 system complies with all 10 Core PrinciplesIn November 2011, the European Central Bank (ECB) published the results of an assessment of the EURO1 system against the Core Principles for Systemically Important Payment Systems (SIPS), as defined by the Committee on Payment and Settle ment Systems (CPSS). The report concluded that EURO1 complies with all 10 Core Principles.

Successful kick-off: EURO1 Review and Reform Program delivers first set of enhance-mentsThe EURO1 Review and Reform Program, which was kicked off in early 2011, led to a series of en-hancements implemented throughout the year. The program was launched to support participants in better dealing with the growing pressure in the areas of liquidity efficiency and credit risk management. It is also geared at optimally positioning EURO1 in an integrated euro payments environment.

faster recycling of funds: EURO1 improves liquidity distributionA first set of measures was implemented in May 2011 to further improve the EURO1 liquidity effi-ciency: • Two additional liquidity distribution windows were

introduced in the system at 11:00 and 12:00 CET, bringing the total number of liquidity windows throughout the day to six.

• The distribution algorithm was adjusted to ensure that an even higher percentage of the pre-funded amounts could be distributed intra-day. About 50 banks now benefit from liquidity distributions on an average day.

As a result of these measures, almost 98 percent of the pre-funded amounts paid in by the EURO1 Participants are now distributed each day. The in-creased efficiency of the distribution algorithm has further sped up the participants’ liquidity recycling capability, allowing for additional intra-day liquidity savings.

More flexibility: EURO1 enhances risk manage-ment capabilitiesIn the second half of 2011, a second set of deliv-erables was implemented to provide banks with more control over the granting of bilateral limits in

EURO1. The new measures have enabled banks to more flexibly define the extent of their counterpar-ty exposures in the EURO1 system and to adjust these more quickly.

EBA CLEARING moved the deadline for chang-ing the discretionary bilateral limits in EURO1 from 18:00 CET on D-1 to 07:00 CET on D. This has put participants in a position to adjust the limits they grant to other banks on a discretionary basis un-til just before the start of the EURO1 system. The changes then become effective immediately. This new deadline allows banks to promptly react to any deteriorating events that may occur overnight, over a weekend or over a bank holiday.

Additionally, the minimum amount to be allocated as bilateral limits in EURO1 was considerably re-duced. The mandatory element of the bilateral limits, which banks have to extend to every other EURO1 Participant, was reduced by 60 percent from EUR 5 million to EUR 2 million. This has al-lowed the banks to decrease their credit exposure to other participants and significantly mitigate the risk of loss. At the same time, the maximum dis-cretionary element of the bilateral limits was raised from EUR 25 million to EUR 50 million. Banks are now able to distribute the limits required to generate liquidity for their payments more in accordance with their own credit risk policies.

The EURO1 Participants embraced the new bilater-al limit structure as soon as it was introduced: 3,650 bilateral adjustments took place within the first few days following its implementation. This led to a better recalibration of liquidity in the system.

Outlook on 2012: more enhancements to followIn co-operation with the EURO1 community, EBA CLEARING is continuing its EURO1 Review and Reform Program throughout 2012 and beyond. As a next step, EBA CLEARING is intending to further reduce the mandatory element of the bilateral limit setting requirements in order to reflect participants’ credit concerns as a result of the ongoing financial crisis within the euro area.


STEP1 Service


fUNCTION Payment service for single euro payments of high priority and urgency, complementary to EURO1 and geared towards small and medium-sized banks

LIvE dATE 21st November 2000

TEChNICAL OPERATOR SWIFT


AvERAGE dAILy vALUE EUR 1.5 billion

LEGAL BASIS STEP1 benefits from the solid legal framework underpinning of EURO1

PARTICIPATION 88 Participants / 41 Sub-Participants

REACh Close to 10,000 BICs directly addressable and over 20,000 BICs reachable via EURO1/STEP1 Participants as listed in EURO1/STEP1 Directory

SETTLEMENT A STEP1 Participant settles with a EURO1 Bank of its choice

SPECIAL fACTS OR fEATURES IN 2011/2012 • Bank of New York Mellon, Frankfurt Branch, connected

to STEP1 as new participant in March 2011• Kookmin Bank International Ltd. connected to STEP1

as new participant in June 2011

Participation in STEP1 (as of March 2012)

STEP1 Participants

STEP1 Sub-Participants

8841


A turn-key solution with wide reach and low running costsThe STEP1 Service provides a simple, direct and inexpensive access to a highly resilient single euro payment processing infrastructure. Thanks to these benefits and the low running costs it causes at the level of its participants, the STEP1 offering contin-ues to be of great value to smaller and medium-sized banks as well as to banks with a limited single euro payments business.

The successful connection to STEP1 of the Bank of New York Mellon from its Frankfurt office in March 2011 and of Kookmin Bank International from its London office in June 2011 testified to the con-tinued attractiveness of the service as a turn-key solution for exchanging single euro payments with a large community of European banks. Kookmin Bank was the first bank from South Korea to join the STEP1 Service.

While the ongoing consolidation process in the industry led to a slight decline in both volumes processed and participant numbers over the past year, STEP1 remained an efficient solution for cost-conscious banks that want to directly manage their payment business. With 88 participants, 41 sub-participants and over 3,000 additional identi-ties listed in the EURO1/STEP1 Directory by March 2012, STEP1 also considerably widens the reach of the EURO1/STEP1 Services.

In 2012, EBA CLEARING will continue to evalu-ate possible enhancements that could be brought to the STEP1 Service. The aim is to ensure that STEP1 will remain the service of choice for smaller and medium-sized banks that want to process sin-gle euro payments at a cross-border as well as at a domestic level.


STEP2 Platform


fUNCTION Pan-European Automated Clearing House (PE-ACH) platform for processing euro retail payments

LAUNCh 28th April 2003

TEChNICAL OPERATOR SIA

AvERAGE dAILy vOLUME 4,232,934 transactions

LEGAL BASIS• Fully compliant with the 6 Core Principles applying to

Prominently Important Retail Payment Systems (PIRPS)• Fully compliant with the Pan-European ACH (PE-ACH)

requirements of the European Payments Council’s PE-ACH/CSM Framework

• Overseen by the European Central Bank

SPECIAL fACTS OR fEATURES IN 2011/2012 Continued steep and rapid volume increase: the overall STEP2 traffic grew by over 48 percent from March 2011 to March 2012

STEP2 Services average daily volume 2009–2012

3m

4m

2m

1m2009 2010 2011 2012

5m


PE-ACh services supporting the banks’ migration effortsSTEP2 affirmed its position as a key SEPA infrastructure over the past year, providing reach to more than 4,600 financial institutions across Europe and processing over a third of the SEPA Credit Transfers handled by CSMs. The platform’s traffic continued its steep rise, with aver-age daily volumes increasing by 2 million in 2011. EBA CLEARING further deepened its fruitful co-opera-tion with its user banks and other infrastructure provid-ers in 2011 to help the industry make optimal use of the benefits of its PE-ACH. In detail, the Company strove to• offer to the banks cost-effective, efficient and resil-

ient SCT and SDD Services with full SEPA reach and based on a country-neutral governance model

• ensure that its STEP2 Services support the banks in providing their customers with service levels that match or even exceed their current domestic service levels

• assist domestic communities in adjusting their work flows to the SEPA requirements in a flexible and timely manner

To fulfil these objectives, EBA CLEARING took some important steps in 2011:• In co-operation with the STEP2 SEPA BWG, the Com-

pany further improved the functionalities around its SEPA Services. This included implementing addition-al settlement cycles in STEP2 SCT and improving intra-day cut-off times by postponing the last settlement cycle by one hour.

• October 2011 saw the launch of the STEP2 Irish Trans-fer Service, which enabled the Irish banks to offer bet-ter service levels to their customers and will serve as a stepping stone for the community’s migration to SEPA.

• In view of the SEPA migration end-date, EBA CLEAR-ING launched the SEPA Large Volume Exchange Pro-ject. A key aim of this program has been to obtain the specific requirements in terms of scale, operations and resilience of users intending to channel very large volumes of retail payments through STEP2.

• The STEP2 XCT Service was closed down in Decem-ber 2011, which contributed to the industry’s effort to phase out legacy infrastructure on its move to SEPA.

The end-date challenge: getting ready for large- volume pick-upIn line with the requirements of the future large volume users of STEP2, EBA CLEARING has started to imple-ment the following upgrades to prepare the platform for the large volume ramp-up in the run-up to the migration end-date on 1st February 2014:• Performance: STEP2 today is capable of handling over

50 million transactions per day. By 2013, STEP2 will be in a position to smoothly process all credit transfer and direct debit volumes that exist in SEPA.

• Operational resilience: A third processing centre will be implemented for committed volumes.

• Functionality: – Introduction in November 2012 of the SDD Core D-1

option for submitting direct debits– Implementation of a later same-day cut-off for SCT– Enhancements to the SCT batch processing service

level, which was introduced in April 2012– Introduction of the batch processing service level in

SDD– Multiple distribution of direct debit information

throughout the day– Secure mass cancellation feature

• Additional services: The introduction of the “Change Account Identification – CAI” optional service is planned for November 2012. Further enhancements, such as functionalities facilitating the management and storage of mandates or IBAN-only routing and BIC enrichment are under investigation.

The platform is thus getting ready to optimally support the banks with regard to their evolving processing needs in SEPA.

For more details on the evolution of the different STEP2 Services in 2011, please consult the following pages.


Onboarding domestic volumesThe STEP2 SEPA Credit Transfer (SCT) Service attracted a significant proportion of the domestic volumes that individual banks and communities started to send through the SEPA channels in 2011: in December 2011, average daily volumes had al-most doubled compared to January. In early 2012, STEP2 SCT processed more than a third of the SEPA Credit Transfers channelled via ACH infra-structures. This underlined the leading role of EBA CLEARING’s PE-ACH platform in facilitating the European banks’ migration to SEPA and providing full reach to banks adhering to the SEPA Schemes.

During 2011, the Finnish banking community com-pleted the migration of its domestic credit transfers to SEPA, using STEP2 SCT as its prime clearing system. In total, 70 percent of all payments sent to STEP2 SCT were domestic, with banks from Italy, France and Germany having significantly stepped up the sending of transactions in 2011.

Additional cycles: improving end-to-end service levelsTwo new morning cycles and one optional night-time settlement cycle were introduced in STEP2 SCT in February 2012. To enable same-day end-to-end pro-cessing for an increased percentage of SEPA Credit

STEP2 SCT Service


fUNCTION PE-ACH service for processing SEPA Credit Transfers

LIvE dATE 28th January 2008


AvERAGE dAILy vALUEEUR 8.6 billion

LEGAL BASISCompliant with the SEPA Credit Transfer Scheme Rulebook and Implementation Guidelines of the European Payments Council (EPC)

PARTICIPATION 123 Direct Participants

REACh More than 4,600 reachable banks, of which 50 percent are reachable via Direct Participants and the other 50 percent via links established with 14 other SEPA CSMs

SETTLEMENT Positions provided by Multilateral Netting Module (MNM) are settled in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2011/2012 • Steep volume growth in late 2011: by December 2011,

the average daily volumes had almost doubled compared to January 2011

• December 2011 witnessed a new record volume peak with 5,249,914 payments settled in one day, largely surpassing the 5 million mark for the first time and thus highlighting the suitability of the STEP2 SCT Service for domestic high-volume usage

• Introduction of additional settlement cycles in February 2012

• Implementation of batch processing option in April 2012


Transfers, EBA CLEARING also postponed the last settlement cycle in the afternoon by one hour. This brought the cut-off for sending transactions to the service to 14:00 CET. These arrangements were put in place to support banks in further optimising their liquidity management and to allow them to offer bet-ter service levels to their customers.

New batch processing functionality: a low-cost option for large domestic volumesDespite rising volume figures, the rejection rates in STEP2 SCT continued to considerably decrease in 2011: they fell from one rejection for every 10,000 transactions in January 2011 to one rejection for every 40,000 transactions sent during December 2011. For certain banks, this figure was even re-duced to one rejection for every 2 million transac-tions sent. This extremely high straight-through pro-cessing rate led EBA CLEARING to create a batch processing mode removing redundant validation processes for transactions sent under this low-cost service level.

The batch processing functionality was success-fully implemented in April 2012 and enables banks to submit batches of payments that are already pre-sorted by receiving counterparties. The batch processing option is offered for the handling of high

volumes and involves only the basic validation that is standard practice in a domestic processing con-text today. The major benefits of this processing mode consist in it being:• offered at half of the cost of the full validation

mode• more efficient and faster in terms of end-to-end

processing• particularly useful for domestic volumes ex-

changed within a community or a specific group of banks, where return rates are significantly low-er than in the cross-border area

More to come: preparing STEP2 SCT for mass migrationThe batch processing mode is a key step towards readying STEP2 SCT for the ramp-up of volumes in the run-up to the SEPA migration end-date. EBA CLEARING is committed to supporting financial institutions in their preparations for this massive migration of domestic credit transfers to the SEPA formats and channels by 1st February 2014. In close consultation with the STEP2 SEPA Business Working Group, the Company is working on further extending the STEP2 SCT intra-day cut-off and on other service enhancements geared at optimally assisting the banks in their SCT migration.

2,606

9

2441

11

26

13

16

13

9019

63

3

7672

29

2325

17

31

24

35

410173

245120

101

135

190

16 18

43

STEP2 SCT Reach: overview of reachable banks by country

Status: April 2012


STEP2 SDD Core Service

STEP2 SDD B2B Service


fUNCTION PE-ACH service for processing SEPA Core Direct Debits

LIvE dATE 2nd November 2009

LEGAL BASIS Compliant with the SEPA Core Direct Debit Scheme Rulebook and Implementation Guidelines of the European Payments Council (EPC)


REAChOver 3,800 reachable banks, of which 50 percent are reachable via Direct Participants and the other 50 percent via links established with 13 other SEPA CSMs

SETTLEMENT Positions provided by Multilateral Netting Module (MNM) are settled in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2011/2012Record peak of close to 120,000 average daily transactions in December 2011


fUNCTION PE-ACH service for processing SEPA Business-to- Business (B2B) Direct Debits

LIvE dATE2nd November 2009

LEGAL BASISCompliant with the SEPA B2B Direct Debit Scheme Rulebook and Implementation Guidelines of the European Payments Council (EPC)

PARTICIPATION72 Direct Participants

REAChOver 3,300 reachable banks, of which 50 percent are reachable via Direct Participants and the other 50 percent via links established with 13 other SEPA CSMs

SETTLEMENTPositions provided by Multilateral Netting Module (MNM) are settled in TARGET2 via Ancillary System Interface (ASI)

SPECIAL fACTS OR fEATURES IN 2011/2012Volume numbers almost tripled from January 2011 to March 2012


STEP2 SDD traffic begins to evolveFollowing the massive increase in STEP2 SEPA Direct Debit Services Participants in late 2010, STEP2 SDD volumes slowly started to pick up throughout 2011. STEP2 SDD Core saw a promi-nent rise in terms of daily average volumes at the end of the year with close to 120,000 transactions processed in December. This represented six times more traffic than the service had processed dur-ing the previous month and constituted a new peak record. Volumes in STEP2 SDD B2B tripled from January 2011 to March 2012.

Sdd Core Scheme Option d-1 to be introducedThe introduction of the SDD Core Scheme Option D-1 in November 2012 will further enhance the STEP2 SDD Core Service and allow a shorter time frame (D-1) for the submission of first, recurrent and one-off SEPA Core Direct Debits. This will put the creditor’s bank in a position to send payment collections to the payer’s bank up to one inter-bank business day prior to the due date. The D-1 option can be used by all participants that sign up for it.

Further enhancements are in the pipeline to pre-pare the STEP2 SDD Services for the migration of legacy direct debits to the STEP2 platform.



fUNCTION Payment service processing retail payments governed by the Convention on Credit Transfers in Euro, i.e. payments of up to EUR 50,000 carrying a BIC and IBAN and sent between banks in the European Economic Area (EEA)

LIvE dATE 28th April 2003

CLOSING dATE 5th December 2011

PEAK AvERAGE dAILy vOLUME 434,133 transactions (December 2007)

PEAK PARTICIPATION 104 Direct Participants (October 2010)

SETTLEMENT in the EURO1/STEP1 system

SPECIAL fACTS OR fEATURES IN 2011 Closedown of the service on 5th December 2011

Service closedown as part of SEPA migrationAfter more than eight successful years of process-ing retail payments governed by the Convention on Credit Transfers in Euro, the STEP2 XCT Service saw its last operation day on 5th December 2011. The closedown of the service marked another milestone in the industry’s migration from legacy to SEPA-compliant payment services and infrastruc-tures.

In April 2003, the STEP2 XCT Service was the first service to go live on the STEP2 platform and the first mass payment service for cross-border euro transactions. It allowed banks throughout Europe to efficiently and effectively meet the requirements of Regulation (EC) 2560/2011 and laid the basis for a Pan-European Automated Clearing House (PE-ACH) due to its full European reach.

STEP2 XCT Service



fUNCTION Euro retail payment service for Italian domestic credit transfers designed to facilitate the progressive migration of these payment flows to SEPA

LIvE dATE 24th November 2006


PARTICIPATION 6 Direct Participants / 67 Indirect Participants

SETTLEMENT in the EURO1/STEP1 system

SPECIAL fACTS OR fEATURES IN 2011/2012Volume rise of 2.2 percent in 2011

Start of progressive migration to SEPAThe STEP2 Italian Credit Transfer (ICT) did not witness any significant changes in processing activity over the past year. Volumes increased by 2.2 percent, and while the number of direct participants did not change, a consolidation of a bank-ing group resulted in the withdrawal of two indirect partici-pants.

As announced in February 2011, one of the service partici-pants started to progressively move its volumes from STEP2 ICT to SCT in the course of the year; this first migration of an ICT Participant to the STEP2 SEPA channel was close to complete by March 2012.


fUNCTION Euro retail payment service ensuring the settlement of Irish domestic credit transfers and direct debits. STEP2 IET is designed to facilitate the progressive migration of these legacy payments to SEPA.

LIvE dATE 10th October 2011



SETTLEMENT Positions provided by Multilateral Netting Module are settled in TARGET2 via Ancillary System Interface (ASI)

Speeding up end-to-end processing of Irish paymentsIn October 2011, the STEP2 Irish Transfer (IET) Service went live on EBA CLEARING’s PE-ACH platform. The new service ensures the settlement of all retail credit transfers and direct debits processed in the Irish legacy formats.

STEP2 IET has sped up the end-to-end processing of Irish legacy payments and has enabled the banks to offer later cut-off times and D+1 end-to-end payment execution to their cus-tomers for both cross-border and domestic euro retail trans-actions. Re-using the pan-European infrastructure of STEP2 for domestic transactions prevented the Irish community from having to invest into major developments at the level of its legacy infrastructure.

The move to STEP2 will allow the Irish banks to migrate to SEPA with more ease and flexibility.

STEP2 ICT Service STEP2 IET Service


MyBank e-payment initiative

A secure customer experience

Ready for pilot launchMyBank will start into its technical pilot phase in June 2012, less than a year after the Company an-nounced its commitment to delivering a pan-Eu-ropean e-payment solution. The aim of the pilot is to prove that the different components of MyBank work together seamlessly and give an excellent end-user experience. The solution will be tested at both national and cross-border level by payment service providers (PSPs), merchants, customers, integrators and routing service providers.

Extensive consultation… In early 2011, EBA CLEARING started to exam-ine various models for creating a pan-European e-authorisation service. Based on a blueprint doc-ument, the Company conducted a wide consulta-tion process involving its shareholders and other relevant stakeholders. It confirmed the keen inter-est among the consulted parties in a solution that would enable Internet shoppers to initiate payments via their online banking platforms or similar pay-ment applications. Following this positive outcome, EBA CLEARING continued the detailed definition of the MyBank solution and the planning for its deploy-ment.

In the second half of the year, the Company launched a promotion campaign, including meet-ings with e-merchant and consumer organisations as well as public authorities, at a pan-European level and nationally. A dedicated MyBank website (www.mybankpayments.eu) was launched in Sep-tember 2011. By the end of the year, MyBank was firmly embedded in the minds of those interested in e-payments and e-mandates.

…and intense engineeringIn order to deliver a state-of-the-art solution from a technical and security point of view, EBA CLEAR-ING drew on leading specialists in the area of e-transactions and processing from all across Europe. In early 2012, the technical and secu-rity documentation as well as specifications were ready and shared with PSPs and integrators supporting the MyBank initiative. The software components of the solution were delivered at the same time. Since April 2012, PSPs and integrators have been able to test the security protocols in the MyBank test environment in a stand-alone mode as part of their preparations for the pilot. Supporting material for merchants has also been put at the dis-posal of future participants.

MyBank


After a six-month-long investigation of the technical features, the MyBank security report was delivered by Fraunhofer Institute, Europe’s largest organisa-tion in application-oriented research, in late March 2012. The MyBank security concept was given full clearance in this report, which concluded that the solution provides end-to-end security in terms of confidentiality, integrity, availability and non-repu-diation. The report also noted that MyBank suc-cessfully balances these security needs with the participants’ business requirements for customer usability, practical usability and cost efficiency.

Live launch expected for early 2013As a pan-European initiative based on online bank-ing, MyBank responds to the regulator’s expecta-tions articulated in the EC Green Paper “Towards an integrated future for card, internet and mobile payments” and to the merchant requirements for-mulated by the E-Payments Merchant Initiative. Work is ongoing in different European countries to roll out e-payment solutions that will rely on the MyBank functionality. E-merchants and govern-ment agencies alike are eagerly waiting for a so-lution that will allow customers to pay for online purchases by initiating SEPA payments via their online banking. It is expected that MyBank will be deployed in a live environment in early 2013.


System performance, maintenance and enhancements

EBA CLEARING continuously manages, moni-tors and controls the payment processing and set-tlement processes of its services. As in previous years, their overall performance was excellent: the availability of EURO1, STEP1 and STEP2 stood at 100 percent throughout the full year of 2011 and the first quarter of 2012.

The considerable traffic increase in EURO1/STEP1 and STEP2 throughout the year and in early 2012 had no impact on the processing behaviour and speed of the central systems. The EURO1 end-of-day settlement and the settlement of the STEP2 Services cycles in TARGET2 continued to function to full satisfaction throughout the whole year.

Crisis management testsNumerous testing exercises for all live services took place throughout 2011. These exercises were carried out in co-operation with service participants and key suppliers and mainly focused on the test-ing of emergency procedures, the simulation of cri-sis events and tests executed for self-certification purposes.

EBA CLEARING participated in the Bi-Annual SWIFT Crisis Coordination & Communication (SC3) Exercise, which took place in May 2011. The event was attended by a large delegation from all principal SWIFT banks, leading central banks and key market infrastructures. The exercise success-fully achieved its desired goals and objectives.

In October 2011, EBA CLEARING organised an internal ‘Live’ Crisis Management Exercise, which simulated the simultaneous outage of one of EBA CLEARING’s Operational Centres and SWIFT. The simulation demonstrated that the internal crisis pro-cesses in place operate well, even under extreme-ly stressful circumstances. It is planned to repeat such an exercise at least once a year.

On 31st March 2012, the yearly STEP2 Crisis Simu-lation Exercise was carried out successfully with 38 participating banks. The exercise was designed to test the availability and functionality of the Disaster Recovery Site for the STEP2 SEPA Services and the Real-Time Window (RTW) as well as notifica-tions via the SMS Alert Facility. For the first time, the new STEP2 IET Service was part of the exer-cise.

In addition, EBA CLEARING participated in the an-nual SWIFT Cold Start Test in April 2012. During the exercise, SWIFT simulated the loss of all of its operating centres, allowing participants to test the recovery process in such an exceptional situation. EBA CLEARING successfully simulated the recov-ery process of the EURO1/STEP1 central system and SWIFTNet connectivity. What is more, EBA CLEARING simulated the EURO1/STEP1 busi-ness day, allowing test participants that are also EURO1/STEP1 Participants to send their pay-ments and monitor their processing via the Interac-tive Workstation (IWS) application.


The EBA CLEARING resilience levels are tested, revised and enhanced at regular intervals. In 2011, the Company continued to perform its daily tasks in parallel for all systems from both its operating centres. Machine and staff rotation were conducted throughout the year in order to keep the staff famil-iar with both operation centres.

In early 2011, EBA CLEARING created the Informa-tion Security and Business Continuity Management Unit to centralise all information security and busi-ness continuity tasks. The new Unit is in charge of the maintenance of the Company’s Business Con-tinuity Management System, which was aligned with British Standard (BS) 25999. It also prepared

the roll-out of EBA CLEARING’s Information Secu-rity Management System throughout 2011, in line with ISO/IEC 27001 certification requirements. This activity stream is geared at ensuring that the Com-pany’s assets are effectively protected based on standardised measures and controls.

In 2011, EBA CLEARING advanced its project on optimising the notification and alerting processes, which included the implementation of the SMS Alert Facility for incident notifications via mobile text messages.

Resilience, information security and business continuity management


As in the previous years, EBA CLEARING contin-ued to nurture strong ties with its shareholder and user community. Responding to and satisfying cus-tomer needs stood at the centre of all the Compa-ny’s activities. This user-centred focus shaped EBA CLEARING’s approach to day-to-day issue-solving just as much as it marked the Company’s strategic considerations.

high customer satisfaction rateThroughout 2011, the Investigations and Customer Support Unit (ICU) successfully continued its mis-sion to offer the users of the EBA CLEARING Ser-vices a single point of contact and extensive sup-port. During 2011, ICU staff received and followed up on over 2,410 enquiries, a reduction of 25 per-cent over 2010. This trend was largely attributed to fewer contact list update requests due to a more frequent use of shared e-mail addresses at the lev-el of the banks and to a decrease in offline data requests. Customer satisfaction with regard to the user support provided by the Company stood at a very high rate of 83 percent in 2011.

Informational meetings and conferencesTo keep the user community updated on EBA CLEARING activities, representatives of the Com-pany participated in the different country group meetings held across Europe. In addition, the Company organised a SEPA Information Session and two MyBank Information Sessions towards the

end of the year. Briefing meetings with newly con-necting participants were held throughout the year.Throughout 2011, EBA CLEARING also partici-pated again in a number of industry events, includ-ing EBAday, the SPIN conference in Italy, the Euro Finance Week in Frankfurt and Sibos, in order to provide the banking industry at large with updates on ongoing Company activities and projects.

Introduction of a newly structured change management process for STEP2In 2011, EBA CLEARING put in place a newly structured and very transparent change manage-ment process for STEP2, in analogy to the ex-isting change management process of EURO1. It enables STEP2 users and banking communi-ties to directly submit change requests to EBA CLEARING. The Company will analyse the impact of a change request and share the outcome with the SEPA Business Working Group, whose mem-bers will then involve their respective community. Once it has been established which changes are supported by the large majority of the users, EBA CLEARING will submit the list to its Board for ap-proval. All approved changes are taken into ac-count for the next annual release. On an excep-tional basis, i.e. upon business requirements and user demands, EBA CLEARING may decide to im-plement some changes outside the annual release dates.

Customer support


The European payments industry must have migrat-ed the great bulk of its 135 million daily credit trans-fers and direct debits to SEPA-compliant formats and channels by 1st February 2014. Supporting the indus-try in this major effort will be one of the key activity strands of EBA CLEARING in 2012 and 2013. Be-sides reinforcing the STEP2 platform for the future processing of high volumes, the Company will also strive to assist the different banks and banking com-munities in putting their respective migration strate-gies into reality. A particular focus will be placed on creating the level of certainty required amongst large volume users on the capability of each one to handle such volumes as a sending and as a receiving bank.

In order to ensure a successful integration of the currently fragmented payments markets, it will be important for the providers and users of payment services to overcome the multitude of divergent business rules and services that exist across Eu-rope. EBA CLEARING shares the concern raised in the industry about the risks of continued fragmenta-tion that such local arrangements – which are often required by local legislation – represent.

While the Company recognises that this matter re-quires in a first place public authorities to cause rel-evant actors to change and to adjust towards har-monised business rules, EBA CLEARING wishes to contribute to this effort by bringing in its expertise as a pan-European operator. The Company and its

SEPA-wide user community will continue to develop the services and functionalities on the STEP2 plat-form in a concerted approach and with a view to supporting market integration and system interoper-ability across Europe.

Evolving the EBA CLEARING Services in line with oversight standards, as laid down in the Report of the CPSS and IOSCO on Principles for financial market infrastructures, will be another important topic on the agenda of the Company in 2012 and beyond. EBA CLEARING will carry on its work on reducing the risk profile of the EURO1 system in this context. In co-operation with the Future Devel-opment Group, the Company will continue to drive the EURO1 Review and Reform Program and study the impact of possible further enhancements to be brought to the service rules and functionalities in response to user needs and expectations.

Following the technical pilot launch of MyBank in June 2012, EBA CLEARING will fine-tune the e-authorisation solution based on the feedback of the pilot participants in preparation for its use in a live environment. The Company will continue its open dialogue with all stakeholders and take the necessary steps to foster the deployment of the so-lution at a pan-European level. This is in line with the mission of EBA CLEARING to provide the Eu-ropean payments industry and its customers with cost-saving pan-European infrastructure solutions.

Outlook 2012


Board CommitteesThe Audit & Finance Committee (AFC) has the mis-sion of setting out the policy and the guidelines for the internal and external audit of the company and its activities, and to define and monitor the internal audit requirements as well as the tasks entrusted to external auditors. The AFC is further entrusted with the review and monitoring of the financial situation of the Company. The AFC is composed of Board members only.

The Board Risk Committee (BRC) has the pur-pose of assisting the Board of Directors in fulfilling its oversight responsibilities with regard to the risk appetite of the Company and the risk management and compliance framework. The BRC is composed of Board members only.

The Innovation Committee’s (InnoCo) mission is to survey market developments, trends and needs in order to assess the practical implications and spe-cific business opportunities for EBA CLEARING. The InnoCo is composed of payment experts from EBA CLEARING Banks with knowledge in key ar-eas, such as IT systems architecture and business development.

The Legal Advisory Group’s (LAG) mission is to analyse and review proposals from a legal point of view and to formulate recommendations regarding the same. The LAG also assists in the monitoring of legal projects and formulates recommendations re-garding the resourcing for such projects. The mem-bers of the LAG are in-house lawyers at banks that are members of the Euro Banking Association and/or shareholders of EBA CLEARING.

The Operations & Technical Committee’s (OTC) focus is to recommend enhancements to the operational, procedural, functional and technical as-pects with regard to the EBA CLEARING Systems, EURO1, STEP1 and (where relevant) STEP2. Its major task is to examine and propose operational

and technical enhancements to the infrastructure of the company. The OTC is composed of business and technical experts from Shareholder Banks ap-pointed by the different national user communities.

The Strategy & Policy Committee (SPC) focuses on addressing the longer-term positioning and devel-opment of EBA CLEARING. Through its monitor-ing of the payments industry, it aims to identify and assess the banks’ needs in order to propose and evaluate the development of new products and services. The SPC is composed of Board members only.

User Advisory Groups and foraThe STEP1 User Advisory Group (STEP1 UAG) serves as a decision-making platform within the STEP1 user community and as a channel to ex-press requirements or proposals towards the Board of the Company and its Committees. The STEP1 UAG is composed of representatives from each country or grouping of users.

The STEP2 SEPA Business Working Group (SEPA BWG) serves as a forum in which direct participants in the STEP2 SEPA Services can discuss and pro-vide feedback on issues and developments con-cerning these services. The SEPA BWG is formed by bank representatives of the different national communities in SEPA. Once the SEPA migration has reached a critical mass, this interim user forum will give way to a more formally defined user say body.

The STEP2 XCT User Advisory Group (STEP2 XCT UAG) was dissolved in December 2011. During the operation of STEP2 XCT, it served as a decision-making platform within the STEP2 XCT user com-munity and as a channel to express requirements or proposals towards the Board of the Company and its Committees. The STEP2 XCT UAG was composed of representatives from each country or grouping of users.

Board Committees, User Advisory Groups and Working Groups


Steering & Working GroupsThe e-Services Working Group was created as an ad-hoc working group to accompany the Manage-ment’s examination of various options and models for creating a pan-European e-services solution. The group reports to the Innovation Committee and provides practical recommendations to the discus-sion around the design and implementation ap-proach for such a solution. It is composed of EBA CLEARING Bank representatives from relevant ar-eas of expertise.

The Future Development Group’s (FDG) mission is to carry out a review to ensure that the EURO1 set-up continues to meet the users’ needs in terms of liquidity efficiency, risk control and the loss sharing arrangements. The FDG acts as an advisory group to the Company’s Board and Management. It is composed of representatives from the treasury and operations departments of EURO1 Participants that wish to make more use of the service.

The Treasury and Liquidity Group (TLG) acts as an advisory group of experts to the Board and Man-agement on issues relating to the use of liquidity within EURO1. The TLG is composed of represent-atives from the treasury departments of EURO1 Participants.

The Steering Group on SEPA Large Volume Ex-change (SEPA LVE SG) is geared at facilitating the migration of large domestic retail volumes to EBA CLEARING’s SEPA infrastructure. The SEPA LVE SG offers a coordination platform aimed at helping all involved parties to ensure that end-to-end pro-cessing of these volumes will take place in a reli-able and stable manner. The group is composed of representatives of banks that are direct partici-pants in one or several STEP2 SEPA Services and wish to prepare for the exchange of large domes-tic SEPA volumes on the sending and/or receiving end.


The Board

The Management

ChairmanGiorGio FerreroIntesa Sanpaolo

Deputy Chairmanrobert heisterborGING Bank

Kristine De LepeLeireKBC Bank

bart Guns (as of 13th April 2012)KBC Bank

DiarmuiD hanrahanAllied Irish Banks

thomas eGnerCommerzbank

oLLi KähKönenNordea Bank Finland

hays LittLejohnUBS

Kirstine niLssonSwedbank

ChieF exeCutive oFFiCerGiLbert LiChter

François boeLsFinance, Budget and Accounting

eriC CharLesUser Administration and Corporate Secretariat

john broxisSTEP2 Services

DanieLe DaneseBanco Popolare Società Cooperativa


Jean-Paul aeberhardtCrédit Agricole

narinda Viguier (as of 14th June 2011)Crédit Agricole

Yannick chagnonSociété Générale

Marie cheVal (as of 1st January 2012)Société Générale

PiP eVansBarclays Bank

Paul nixon (as of 4th November 2011)HSBC

José luis Fernández iglesiasBanco Bilbao Vizcaya Argentaria

christian WesterhausDeutsche Bank

rui FonsecaCaixa Geral de Depositos

daniel szMuklerOffices Administration and Management

eVa herskoVicoVaOperations

alan taYlorEURO1/STEP1 Services

andré VinkInformation Security and Business Continuity Management


Country Representatives

EvA hERSKOvICOvACzech Republic and Slovakia

LUIS MINGUEzSpain

ALAN TAyLORIreland and United Kingdom

KATjA hEydERAustria, Germany, Switzerland

dAvId RENAULTFrance

dANIELA vINCIItaly

CLAUS f. hILLESSenior Advisor Austria, Germany, Switzerland

jETTE SIMSONDenmark, Finland, Norway, Sweden and Baltic Countries

ANdRé vINKThe Netherlands


© 2012 EBA CLEARING All rights reserved

Concept and textEBA CLEARING 40 rue de CourcellesF-75008 Paris

Graphic designformfellows Kommunikations-Design Frankfurt am Main

PhotographsMichael MeinhardBosse und Meinhard, Bonn

ReproductionsORT Studios Frankfurt GmbH

Printingh. reuffurthMühlheim am Main

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EBA Clearing Report on Activities 2011 - Overview

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