ECB wants more competition in credit cards

In this file photo Dmitry Nikolin, the Executive Director of Eurasian Bank, shows a new VISA card encrusted with a 0.02 carat diamond and laced with an elaborate gold pattern in Almaty December 23, 2008. More competition is needed in credit cards in Europe to offer consumers a wider choice, although fees remain on a downward trend, a European Central Bank policymaker told Reuters.

FRANKFURT (Reuters) - More competition is needed in credit cards in Europe to offer consumers a wider choice, although fees remain on a downward trend, a European Central Bank policymaker told Reuters.

The European Commission reached a deal this month with MasterCard (MA.N) on halving its fees and accused rival Visa Europe of restricting competition. Both dominate cross-border transactions.

"We see overall pressure for fees to come down," ECB Executive Board Member Gertrude Tumpel-Gugerell said.

"One of the most controversial issues has been the multilateral interchange fee per direct debit transaction. End of March, the European Commission has provided clarity on this issue," she said in an interview conducted on Monday.

"We see the need for an additional European card initiative as the logical follow-up of the current national one and in addition to the international card schemes already active on a pan-European scale," she said.

The EU has adopted a law to put in place a single euro payments area (SEPA) so that customers using just one bank account can authorise standing orders, direct debits and money transfers in euros from their account to anywhere in the 27-nation bloc.

Tumpel-Gugerell said it was time to fix a date for scrapping national payment systems in the EU and switch to SEPA to achieve savings and exploit the benefits of the common currency.

"I think there are many signals that an end date for credit transfer and direct debit migration would be useful ... The discussion starts now about an end date," Tumpel-Gugerell said.

STREAMLINE SUPERVISION

She also said progress must be made in streamlining Europe's financial supervision to apply lessons from market turmoil.

EU leaders have agreed that a plan to reform supervision, drawn up by former Bank of France Governor, Jacques Delarosiere, should form the basis for legislative proposals. It foresees two new pan-EU bodies, the first chaired by the ECB to monitor system-wide risk, a gap highlighted by the credit crunch.

A second body would combine national market, insurance and banking supervisors with binding powers over the EU's member states, a step seen as going too far by Britain.

Last week Bundesbank President Axel Weber said such a system would create "asymmetry" by giving too much power to the EU level but Tumpel-Gugerell said change was needed.

"We have always said we think that central bankers and supervisors have to work closely together," she said. "It's part of this institutional design. It's not about big roles and small roles. We need a careful combination of tasks that can be performed on a European level and national supervisory tasks."

Some streamlining has already taken place.

"So we do not start from zero but it's important to make further progress. You can achieve both monetary stability and financial stability. This will be the optimal," she said.

(Reporting by Huw Jones, editing by David Stamp)