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IANUS 2014 – MODULO JEAN MONNET ISSN 1974-9805 IANUS 2014 MODULO JEAN MONNET Building up a EU-based payment system. Learning from the past to address the challenges ahead 1 Ianus - Diritto e finanza Rivista semestrale di studi giuridici N. 11 Speciale - dicembre 2014 Editore - Università di Siena, Via Banchi di sotto, 55 - 53100 Siena Direttore responsabile: Angelo Barba http://www3.unisi.it/ianus/ Registrazione Tribunale di Siena n. 3 del 7 marzo 2008 ISSN: 1974-9805 IANUS 2014 – MODULO JEAN MONNET ISSN 1974-9805 TABLE OF CONTENTS Call for Papers.………………………………………………… 5 PAPERS Integration of the EU payment systems: a “tolerable straight 7 line”?, DANIELE CIANI, PAOLA MASI…... …………………….. Can the European Central Bank create a European identity?, ANDERS RAVN SØRENSEN……………………………………... 41 When diversity and cultural identity meet a common payment system:“The challenges faced in integrating a single payment system within the European Union”, RUXANDRA GABRIELA POPESCU……………………………………………………...... 61 A Sharia-compliant Payment System Within the Western World, ANDREA BORRONI…………………………..…………. 67 Regulating Digital Payment Systems through a Financial Governance Paradigm, ISRAEL CEDILLO LAZCANO.…………. 111 Regulating mobile-payments. Learning from the global experience, ELISABETTA CERVONE.……….………………….. 129 Overview of directive 2014/92/EU, GABRIELLA GIMIGLIANO..…………………………………………….... 147 3 4 IANUS 2014 – MODULO JEAN MONNET ISSN 1974-9805 CALL FOR PAPERS Building up an EU-based payment system. Learning from the past to address the challenges ahead Autumn School, 23-25 October 2014 Within the framework of the Jean Monnet Teaching Module on the “Europeanisation of the payment system”, the Department of Business and Law of the University of Siena has the pleasure of inviting international academics and professionals working in the field of payment systems to submit proposals for papers. The participation of Ph.D. and tenure track scholars is particularly welcome. We welcome proposals from scholars working in the fields of law, political economics, economics, sociology, management, cultural studies, anthropology or any other discipline seeking to engage seriously with the questions posed: - Building up the EU-based payment system is a long-standing process. What can the historical development of the European integration process and, above all, banking history teach us? - The process of integrating European payment services has made many steps forward. There are Community rules for service providers, framework contracts, contract remedies and a duty of information, in addition to regulatory and technical standards for direct debit, card payments and credit transfers. How are Community-based rules changing domestic jurisdictions? - In an EU-based payment system, financial and banking intermediaries perform a critical role. What about the new service providers (for example m-payment services)? - Money is also a means of membership and the EU law on money may contribute to create a sense of Community identity. What kind of “money” could improve the relationship between the European Community and the individual citizen? - The European Union claims to be a pluralistic community. How should “cultural pluralism” be accommodated in the EU-based payment system? 5 - In the process of building up a Community-based payment system, there is a trade-off between competition and stability. What kind of balance can be reached? - The EU-based payment system framework covers all Member States. How does the dualism between Euro and non-Euro Countries challenge the Europeanisation of the payment system? - What should we expect from monetary policy and European Central Bank? - How does the EU-payment system match up with the political vision of Europe? The event is a three-day workshop to be held at the University of Siena from 23rd to 25th October, 2014. The workshop will be held in English and no translation services will be provided. 6 IANUS 2014 – MODULO JEAN MONNET ISSN 1974-9805 INTEGRATION OF THE EU PAYMENT SYSTEMS: A “TOLERABLE STRAIGHT LINE”? Daniele Ciani and Paola Masi1 Bank of Italy The way to the EU single internal market, a pillar of the Treaty of Rome (1957), was paved only in the 1980s with the Commission’s White book on “completing the Internal Market”. This gave rise to an intense legislative activity, continuing until 1992, and a complete framework legislation for the creation of an extensive market, implying the development of economies of scale, competition and growth. Little or no attention was paid to matters of financial stability. After the introduction of the single currency (1999) and following on developments in the financial sector, considerable advance has been made in the integration of payment and settlement systems, for both wholesale and retail transactions. However the process still needs to be completed and the consequences of the recent economic crises seem to have damped down the momentum of and consensus on linear progress towards the economic integration in Europe. The impact of financial stability on the integration process can no longer be disregarded, and the costs of integration cannot be ignored. This paper has the objective of highlighting the economic and regulatory drivers of integration in payment systems after more than two decades of experience. Its main purpose is to contribute to a non-static view of integration. The main conclusion is that through the delays and difficulties of the integration process (i.e. resistance to changes on the part of national banking communities, asymmetries in the degree of integration of wholesale versus retail payments, slow diffusion of innovative payment instruments), a more realistic view of payment systems, as utilities for the financial sector, has finally emerged. Table of Contents 1. Introduction 1 All the authors are with the Bank of Italy. The opinions expressed are their own and do not necessarily reflect those of the Bank of Italy. Address correspondence to: [email protected] 7 DANIELE CIANI – PAOLA MASI 2. The While Book of 1985 and payment in the internal market in 1990 3. The Economic rational of the Single Market 4. The Euro and the law of ‘one price’ 5. The age of SEPA 6. The aftermath of 2008 7. The integration of payment and retail banking services: the recent strategy 8. What have we learned? 8 IANUS 2014 – MODULO JEAN MONNET ISSN 1974-9805 I am now beginning to get fairly into my work; and by the help of a vegetable diet, with a few cold seeds, I make no doubt but I shall be able to go on, in a tolerable straight line. (L. Sterne, Tristam Shandy, 1759) 1. Introduction The way to the EU single internal market, a pillar of the Treaty of Rome (1957), was paved only in the 1980s with the Commission’s White book on “completing the Internal Market”. This gave rise to intense legislative activity continuing until 1992, and complete framework legislation for the creation of an extensive market, implying the development of economies of scale, competition and growth. Little or no attention was paid to matters of financial stability. After the introduction of the single currency (1999) and following on developments in the financial sector, considerable advance has been made in the integration of payment and settlement systems, for both wholesale and retail transactions. However, the process still needs to be completed and the consequences of the recent economic crises seem to have damped down the momentum of and consensus on linear progress towards the economic integration in Europe. The impact of financial stability on the integration process can no longer be disregarded, and the costs of integration (required investment in infrastructures, increasing coordination costs, interdependencies, new practices and standards) cannot be ignored. This paper retraces European policies and legislative measures aiming at integration in payment systems over the last two decades. The main phases of the process (launch of the single market, introduction of the euro, creation of the single euro payment area, aftermath of the 2008 crises) are identified through the adjustments and changes in the regulatory and economic approach adopted by the European institutions. The main conclusion is that through the delays and difficulties of the integration process (i.e. resistance to changes on the part of national banking communities, asymmetries in the degree of integration of wholesale versus retail payments, slow diffusion of innovative payment instruments), a more realistic view of payment systems, as utilities (like electricity, gas, etc.) for the financial sector, has finally emerged. As is already the case with the regulation of utilities of high public relevance, the recent strategy of European regulators includes the objectives of consumer protection, transparency, security and legal clarity. The paper is organized as follows. In sections 2 and 3, we illustrate the creation of the single market in Europe and its economic rationale, with the 9 DANIELE CIANI – PAOLA MASI liberalization of cross-border operations for financial institutions, including the provision of banking services, and the policies followed by the European Commission and monetary authorities during the 1990s. At that time, there was total reliance on market forces to help the integration of payment services while policy action was limited to the integration of large-value payments, with a view to the adoption of the single currency and single monetary policy. Sections 4 and 5 illustrate how, after the introduction