Cross-Border Service Realisation in the Single Market





The introduction of the single currency in the EU will dramatically alter the environment within which financial business is transacted. This new era promises greater efficiencies, lower costs and greater choice for the users of financial services. Furthermore, the rapidly increased use of on-line technologies such as the Internet (enabling better and more advanced methods of electronic banking and other electronic commerce) should compound the effects of the single currency for European citizens and businesses.

These developments are welcomed by the banking industry, and by the users of financial services. However, the regulatory and legal framework governing these activities in the EU seems to have reached an impasse in its ability to allow the delivery of the potential benefits of the single currency by the banking community. It seems that, in some areas, aspirations have overtaken the practical ability to deliver. In other words, whilst the European single currency has at last arrived, a real Single Market has not yet been created in which to deliver its full benefits.

To deliver the benefits of the single currency to European businesses and citizens, priorities must be set. ABN AMRO has, for the purposes of this paper, chosen to highlight those issues or disparities we feel need the most urgent attention. Many of these issues are already recognised as difficult subjects to approach at EU level. ABN AMRO suggests a practical approach, in keeping with its actions and customer relations. The Bank is committed to the European Union, serving its European customers from offices in every EU country, and in sixty other countries world- wide.

EU Regulatory Environment
for Credit Institutions

The regulatory framework for credit institutions has been shaped by those Articles in the EU Treaty, which allow for the free movement of goods, services, and capital. In this regard, the home state control principles of the Second Banking Directive and the Investment Services Directive have assisted in the creation of a Single Market for financial services. However, much of the regulatory framework for credit institutions was created before the Single Market was an established principle. More importantly, it was established before the prospect of economic and monetary union became real and hence, before companies operating in Europe looked to the actual and final creation of the Single Market.

The first and most basic aspect of Single Market creation is to ensure that Member States properly impose existing EU measures. For financial services companies operating in Europe, unclear or inconsistent imposition of EU measures can lead to fundamental legal uncertainty about otherwise simple business arrangements. The following complex issues which are particularly important to the financial services sector, can be highlighted:

The financial services sector and its customers would welcome clear and decisive action in relation to the imposition of EU measures, and also the replacement of EU measures inapplicable or contradictory to the EU Single Market.

Establishing Relationships
between Customers and Banks

The process by which a relationship between a potential customer and a bank is established varies from country to country. The legal and regulatory environment governing this process is based heavily on national rules, and much of the process is not under EU competence. Having said this, however, the Community has, from time to time, approached issues relating to the establishment of relationships (contract law) through conventions. For the time at which those conventions were drawn up, they have been successful.

Furthermore, the procedures established for the setting up of a relationship presupposes, or demands, face-to-face contact in many instances. This suggests, merely, that recognition of new ways of doing business - especially via the Internet or other electronic or on-line means - must be recognised both in EU law and at national level in order to facilitate that process.

The most important aspects to consider are:

  1. Applicable Law: the national jurisdictional laws governing contracts currently differ so widely between Member States that any pan-European contract format must be applied through the law of one national jurisdiction. However, even using one jurisdiction for these contracts does not mean that a single set of documents can be concluded. This is due to Article 17 of the Brussels Convention (1968) which retains the necessity for specific acceptance of national jurisdictional clauses. Mutual recognition of contract law between the Member States, allowing both single documentation and the ability to bring cases in various Member States, would reduce this problem. An update of the Rome and Brussels Conventions, therefore, would be appropriate in this regard.
  2. Contract terms: the general terms and conditions applicable to current accounts held with banks are not comparable in most respects between EU national jurisdictions. Rules relating to guarantees, operation of bank accounts, consumer protection, data protection, confidentiality, disclosure, and admissibility of evidence in court cases are prime examples of areas that should not, in practice, differ between Member States. It seems that, in the creation and operation of current accounts held with banks, a certain amount of consistency and/or harmonisation should be the goal. How else can services be offered in a transparent fashion between Member States in the EU?
  3. Contract Negotiation and the Validity of Contracts: with particular regard to on-line services, the process of negotiating and validating contracts must be one which demands attention at EU level. In the first place, most national jurisdictions presuppose that a contract shall be written on paper, signed by hand and physically delivered. Secondly, EU laws relating to money laundering require that the customer should present him or herself to the institution with identification in order to verify his or her identity. Thirdly, the way in which customers may reconsider their contract (the so-called ‘cooling off’ or ‘warm up’ period) differs wildly between Member States. Finally, the type and format of information that a customer must be provided with before conclusion of a contract differs in both content and extent.

Cash Management and the euro

The real benefits of the single currency to European businesses and citizens are likely to be more demonstrable, in the first instance, to the corporate customers of banks. This is because the regulatory and logistical costs of transacting business will still be relatively high compared to the domestic market situations.

More efficient use of assets for European companies is needed in cash management. Currently, cash management structures are only normally set up for large corporations because of the costs involved in their establishment. However, as improvements in cross-border financial transactions are made for lower value transfers, as well as improvements in the legal and regulatory framework, these efficiencies will be available to smaller companies and private individuals.

Cross-border cash pooling, for example, would enable a customer to receive interest payments on the combined balance of their current accounts in different EU countries. In other words, if a company were to have a deficit in one country, but a credit in another country, it ought to be possible, notionally, to merge these balances (i.e. without making any transfers) and pay interest on the total net balance.

However, in order to set up these rather sophisticated structures, and to make it commercially plausible for corporate groups as well as private individuals or smaller companies to gain from the technical ability which banks now have, the following issues must be addressed:

  1. There must be some co-ordination between central banks in order to allow the offset of any notionally pooled amounts in different countries against a bank’s consolidated balance sheets. In a euro environment, this should be feasible and should, we believe, be a subject the ECB should pursue.
  2. National rules relating to the ability to create joint and several liability or cross-stream guarantees (i.e. guarantees of other group companies' liabilities) and collateral security in a group should be harmonised, if necessary, by EU regulation.
  3. Rules relating to the revocation of transfer orders, as well as the formal steps (if any) which might prevent this differ from country to country. There are different rules relating to the payment of stamp duties in connection with these arrangements; these rules govern the circumstances, calculation, liabilities and consequences of non-payment of duty.
  4. Laws relating to the operation of bank accounts differ between the Member States, in some cases
  5. requiring that the laws of the host jurisdiction govern bank account operations. Also, interest payment on certain current accounts is not allowed in some countries (in particular, France).
  6. The formalities required in order for a depositor to create a valid charge-back or a security interest over its deposit in an account maintained with the bank differ, from country to country.
  7. The national disparities in taxation treatment (such as, amongst others, interest allocation, deductibility of interest, and withholding tax on bank interest) prevent harmonised service conditions.


The disparities between Member State laws relating to financial services is understandable, given the long divergent histories and traditions of the EU Member States. But the fact remains that the euro has been created in order to make the EU into one of the most efficient and competitive business environments in the world. Perhaps more importantly, it was created in order to complete the EU’s Single Market and deliver its benefits to EU citizens and businesses.

We have highlighted a number of the sources of inefficiency in Europe’s financial services market, and a number of areas of the Single Market which have not been addressed as effectively as they could have been. Other areas such as investment services and securities regulations have not been addressed, but are nonetheless equally important. Aside from the long traditions of the legal and fiscal systems of the EU Member States, and the difficulties in creating accords in some of these areas, we hope the European Commission and the EU Member State governments give these issues high priority. The euro should be delivered as it has been promised. And we will assist in any way possible in order to achieve that.