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European Banks' Fees For Cross Border Fund Transfers Are Too Expensive

Mandy Robinson, Tax-news.com, London

12 February 2001

The European Central Bank (ECB) released its monthly report last week criticising banks across Europe for the unlawful practice of 'double-charging' both the sender and receiver of a cross-border transfer.

The report admits that the problem is difficult to eradicate because a bank receiving the funds can not 'recover costs if the customer ordering a cross-border transfer is to pay all the charges to the sending bank.' However, states the report, the banks should cease operating this double-charging 'phenomenon' as it is prohibited by the Directive of the European Parliament.

The report highlights the findings of a recent ECB study entitled 'Bank Charges in Europe' which revealed that the practice of double-charging is still used in 25% of all cross-border transactions in European banks. This is unlikely to be tolerated any further with plans for a new process of charging fees on the horizon. The process, called a default multilateral interbank exchange fee (MIF), has been suggested in the short-term as a solution to the double-charging problem. If approved by the European Commission the MIF would cover the costs of the service of the receiving bank and would be added to the amount of the transfer.

The ECB says it is confident that the banks will amend the double-charging practice, particularly if the MIF is implemented but says it is too soon to predict that bank users will get a better deal before the euro currency comes into circulation next January.

In conclusion, the ECB urged: 'Banks urgently need to step up their efforts. Throughout 2001 the Euro system of national central banks will monitor their progress very closely. An assessment report will be published in early 2002. Banks will not have succeeded in an important part of their preparations if a retail payment infrastructure and service level, closer to domestic standards, were not to be achieved in time (2002).'

The full monthly bulletin ECB report can be found at: http://www.ecb.int/pub/pdf/mb200102en.pdf

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