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At the beginning of August, the media have reported an alleged conflict of
competences between the European Monetary Institute (EMI) and the European
Commission. The issue concerns payment cards of a new kind, namely cards
endowed with a micro-chip in which purchasing power can be stored ("pre-
paid cards"). Such cards are presently being tested in several EU states
and are studied by payment systems experts in many countries. They are
different from instruments already in use, e.g. from telephone cards
carrying a chip, in that they can be developed into multi-purpose
instruments, allowing, for instance, payments for public transport of
highway tolls, or indeed to make small value payments in the retail and
service areas generally, and this in any given currency, including the ECU.
Thus, these cards could in future become "electronic purses" which might,
to some extent, replace bank notes and coins.

On 10 May, the EMI had adopted a report of one of its working groups on
this subject. There can be no doubt that the near-money character of these
instruments is of direct interest to the Central Banks. The Maastricht
Treaty has entrusted the EMI with the task of monitoring the orderly
functioning of payment systems.It is only natural, and indeed necessary,
that an EMI report should study the monetary implications of electronic
purses. The EMI report concluded, inter alia, that only licensed credit
institutions should be allowed to issue such instruments.

Concern has been expressed that the European Commission plans to launch a
study which appears to cover ground already explored by the EMI report (a
Commission call for tenders was published at about the same time at which
the EMI report appeared; the period during which tenders could be submitted
expired on 5 August). The Commission wishes to point out that, when the
consultancy firm for its study will be chosen it will be instructed to base
its research on the EMI study rather than to review critically its
findings. The EMI's view, in particular, that only banks should issue the
cards concerned, is not called into question by the Commission as a matter
of principle.

The purpose of the Commission research is to assess the implictions of pre-
paid cards for the Single Market. The use of such cards could raise
important issues in relation to an integrated economic area. For instance,
if such cards were to have a different layout in each country it might
appear that they could be used only within the national frontiers. The
"interoperability" of payment cards in general is an aim which the
Commission set forth in a report published in 1987. Moreover, in 1987 and
1988, the Commission  issued Recommendations outlining the necessary
consumer protection and other rules which should govern payment cards.
These principles might now have to be adapted to "electronic purses". It is
on these aspects that the planned study will focus. There can be no
question, therefore, of the Commission interfering with EMI competences in
proceeding with its study. The Commission sees synergies between the work
of the EMI and its own concerns.

Should both Community institutions conclude, for instance, that there was a

need for regulatory intervention, it would be for the Commission to draft
any European law. Similar cooperation already takes place in related areas
of payment systems ( in particular on rules governing transfers without
giving rise to any difficulties.

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