European banks are bracing for significant financial impacts as the EU’s SEPA Instant Payments regulation mandates 24/7 euro credit transfers by October 2025. Nearly half of surveyed banks anticipate losing millions in interest income due to increased liquidity requirements under the new rules.
The core challenge stems from the necessity to pre-fund accounts in the Target Instant Payment Settlement (TIPS) system, which operates around the clock, unlike the European Central Bank’s Target2 system, which is limited to weekdays. This means banks must hold idle funds during evenings, weekends, and holidays, tying up capital that could otherwise generate returns through lending or investments. Additionally, borrowing from central banks incurs costs, further eroding potential earnings.
The planned removal of the €100,000 transaction limit adds complexity, making it more challenging for banks to predict liquidity needs. A survey indicates that 93% of banks are concerned about this change, with 48% expressing strong apprehension.
To mitigate these impacts, banks are enhancing their liquidity buffers and upgrading fraud and sanctions screening tools to handle higher volumes, especially during off-peak hours. Approximately 40% are adjusting risk management frameworks, and a similar percentage are establishing bilateral agreements to set transaction limits with other banks.
Despite these challenges, over 80% of banks believe the benefits of SEPA Instant Payments outweigh the costs. While nearly half struggled to meet the initial January deadlines, 85% consider the October deadline achievable.
In summary, while the SEPA Instant Payments regulation presents liquidity challenges for European banks, the industry’s proactive measures and the anticipated benefits suggest a positive outlook for the future of real-time euro transfers.
