French banks down tools on EU-wide payment project

BRUSSELS, Nov 26 (Reuters) .

French banks have suspended the launch of new pan-European payment services due to confusion over tariffs in the latest setback for a key EU project to improve consumer choice and boost growth.

The European Union has plans for a single euro payments system or SEPA to give its 495 million consumers cheap payments of bills and purchases in euros from a single bank account.

The move is designed to encourage cross-border competition and spur the creation of jobs and growth, the EU's executive European Commission has said.

The project requires the bloc's 8,000 banks to invest billions of euros changing their systems to comply with common SEPA standards on credit transfers, direct debits and payment cards.

SEPA-compliant credit transfers were launched in January by banks across the EU but the French Banking Federation (FBF) said on Thursday its members have suspended work pending clarification from European authorities on tariffs, in particular charging for services that banks supply to each other, it said in a statement.

"As long as these rules are not clarified, the French banks, like many European banks, cannot start the work on the timetable because like all businesses, banks need to know their economic and legal risks," the statement said.

Banks across the EU are worrying how the new services would be paid for after last December when the Commission said MasterCard's (MA.N: Quote, Profile, Research, Stock Buzz) interchange fee on its cross-border credit cards and Maestro direct debit cards violated EU competition rules.

The interchange fee is charged to retailers for processing a card payment but retailers have dubbed it a tax on consumers.

MasterCard is appealing the decision, a process that will take months but the November 2009 deadline for a full switch to SEPA products in Europe is looming.

The Commission and the European Central Bank has said banks could use an interchange fee on direct debits but only for an "interim period" and if it was justified -- a move that banks say has "destabilised" their planned SEPA business models. (Editing by Dale Hudson and Elaine Hardcastle)