Just days after the European Central Bank (ECB) suggested that banks should increase fees and commissions to customers, the European Commission has proposed making cross-border payments in euro cheaper across the entire EU.

ECB concerns about banks profitability

The ECB published its annual report on Monday, detailing its supervisory activities for 2017. It said that profitability in the low interest-rate environment is a key challenge for banks in the euro area and the chair of the ECB’s Supervisory Board, Danièle Nouy, expressed the board's concern about this. While operating in a low interest-rate environment, Europe's banks are also facing other problems, including cyber risks, losses from non-performing loans, the transition to digital banking and open banking, as well as competition from non-bank service providers and geopolitical risks.

Cheaper euro payments for EU members

But on Wednesday, the Commission proposed that cross-border payments in all member states should be cheaper. Currently, euro area residents or businesses can make euro payments to another euro area country without paying cross-border fees (although fees for a domestic transaction might apply). The proposal aims to extend this benefit to people and businesses in non-euro countries. The Commission stated: “This will allow all consumers and businesses to fully reap the benefits of the Single Market when they send money, withdraw cash or pay abroad. All intra-EU cross-border payments in euro outside the euro area will now be priced the same – with small or zero fees – as domestic payments in the local official currency.”

The Commission's Valdis Dombrovskis, said: “With today's proposal we are granting citizens and businesses in non-euro area countries the same conditions as euro area residents when making cross-border payments in euro. All Europeans will be able to transfer money cross-border, in euro, at the same cost as they would pay for a domestic transaction. Today's proposal will also require full transparency in currency conversion when consumers are paying by card in a country which does not have the same currency as their own.”

The legislative proposal will now be submitted to the European Parliament and Council for adoption.

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CTMfile take: This apparent lack of joined-up thinking from EU institutions may seem at cross-purposes but the comments from the ECB don't have any legislative weight, while the Commission's proposal is already being submitted to the European Parliament and Council for adoption. Consumers and businesses might have the impression that if they benefit from lower fees on the one hand, they will pay for that elsewhere.