The European Payments Council (EPC) has outlined its position on several possible post-Brexit scenarios and how they will affect the Single Euro Payments Area (SEPA) schemes. The position paper was published at the end of May, as the second phase of the Brexit negotiations began. As an EU member, the UK is part of SEPA and many UK payment service providers participate in the four SEPA payment mechanisms: 82 in SEPA Credit Transfer (SCT), 38 in SEPA Direct Debit (SDD) Core, 26 in SDD B2B and one in SCT Instant.

The UK leaves the European Union on 30 March 2019, followed by a transition period until 31 December 2020. During this period, the UK will remain within the geographic scope of SEPA but what will happen after the end of transition?

3 post-Brexit scenarios

As the EPC notes, the Brexit negotiations must reach a final outcome before the implications for SEPA participation become clear. Some changes are likely and the EPC adds that it is fully aware that “Brexit will most probably bring significant changes and will reshape the relationships between the EU and the UK in the financial services domain.” However, in each of the post-Brexit scenarios outlined below, there is the potential for the UK's SEPA participants to continue to provide SEPA payments.

1. Remain in EEA

If the UK leaves the EU but remains in the European Economic Area (EEA), the UK laws and regulations should remain aligned with the EU legal framework which would allow the UK scheme participants to continue their participation in the SEPA schemes.

2. Leave EEA but have FTA with 'functional equivalence'

If the UK leaves the EU and the EEA but puts in place a free trade agreement between the EU and UK which results in ‘functional equivalence’ of the EU legal framework, in other words, if the UK implements requirements equivalent to the criteria for participation in the SEPA schemes, this would allow the UK scheme participants to continue their participation in the SEPA schemes. It is not excluded in this scenario that the EPC may have to assess and confirm any functional equivalence of the UK’s legal framework with European Union law.

3. No legal alignment

If the UK leaves the EU and does not remain in the EEA or does not agree on an alignment of its relevant legal framework with that of the EU, the eligibility of the UK to be part of the geographical scope of the SEPA schemes will need to be assessed by the EPC on the basis of an application from the UK PSPs’ community. As the geographical scope of SEPA already extends beyond the EU and EEA, including several third countries and territories, the option remains that the UK continues in the scope of the SEPA schemes, provided it fulfils the eligibility criteria.