Faster clearing of payment transfers - 1

Faster clearing of payment transfers

Contributed by Gárdos Füredi Mosonyi Tomori

November 05 2010

The National Bank of Hungary has recently amended its Decree on Payment Services
Activity (18/2009 (VIII 6)) in order to expedite the clearing of domestic payment transfers
as of July 2012.

The present regulation provides that domestic payment transfers must be cleared
within one business day. The aim of the amendment is to ensure that such payment
transfers can be credited to the account of the payee's financial services provider within
either four or six hours. The four-hour execution time limit will apply to all financial
institutions with a direct connection to the national clearing system, whereas the sixhour
time limit will apply if a payer's institution is connected to the domestic clearing
system indirectly, as in the case of mutual savings banks. The reduced execution time
will apply to electronic payment transfers denominated in forints, but not to paper-based
transfers or payment orders in a foreign currency, as direct payment processing is
unavailable in such cases.

The existing regulation is based on the EU Payment Services Directive (2007/64/EC).
The National Bank of Hungary introduced the amendment on the basis of the
authorisation granted by the directive, which allows EU member states to provide for a
shorter maximum execution time for domestic payment transfers.

The details of the amended decree have been developed in line with the standards set
for the Single European Payment Area (SEPA), although Hungary remains outside the
eurozone. Several studies have considered Hungary's optimum strategy towards SEPA,
but the authorities and the banking industry ultimately agreed that Hungary would be
placed at a competitive disadvantage if it did not start to apply SEPA standards to its
domestic payment system before joining the eurozone. Therefore, these standards are
considered a stable basis for the reform of the Hungarian payment system.

As well as facilitating Hungary's potential future accession to the eurozone, the reform
is intended to help Hungarian financial services providers to compete with providers
based in other EU member states. A shorter execution time is also likely to benefit
customers. It will facilitate their financial management, as they will be able to use
payments for a new transaction on the same day. Moreover, as financial services
providers will no longer be able to earn interest on such payments during the one-day
execution period, their customers will profit instead.

The amendment will become effective on July 1 2012, giving payment service providers
and the clearing system operator enough time to implement the necessary system
changes.

For further information on this topic please contact Gabriella Gubik at Gárdos, Füredi,
Mosonyi, Tomori by telephone (+36 1 327 7560), fax (+36 1 327 7561) or email (gubik.gabriella@gfmt.hu).

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