Deutsche Bank Global Transaction Banking An Overview of

Deutsche Bank Global Transaction Banking An Overview of SEPA October 2010 Client logo positioning

Do you really know what SEPA is? Top-10 in Google. com: — — — Single Euro Payments Area Scottish Environment Protection Agency Solar Electric Power Association State Environmental Policy Act Science Education Partnership Award South. Eastern Psychological Association Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 53 1 2010 DB Blue template

SEPA Background SEPA Credit Transfer SEPA Direct Debit SEPA Benefits SEPA Status and Outlook Deutsche Bank Global Transaction Banking

The European Payments Landscape pre SEPA (1) — Domestic Credit-Transfer and Direct-Debit schemes vary considerably throughout Europe — Example Direct Debit: — — — — Different mandates Different submission dates Different cut-off times Different return timeframes (finality of payment) even post-PSD — Interbank rules vs. local law Different file formats No cross-border direct debits Potentially forced to use different banks in different countries Cumbersome account reconciliation efforts Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 54 3 2010 DB Blue template

The European Payments Landscape pre SEPA (2) — Domestic Credit-Transfer and Direct-Debit schemes vary considerably throughout Europe — Example Direct Debit: Belgium (DOM’ 80) - No due date Registration of creditor by DB with CEC/UVC, which assigns a unique creditor ID Debtor bank needs the mandate (mandate check) DOM’ 80 file format Spain (CSB 19) - No due date No registration of the creditor with central bank Debtor bank does not need the mandate (no mandate check) CSB 19 file format Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 54 Italy (RID) - Due date - Debtor bank needs the mandate (mandate check) - CBI RID file format Registration of creditor with Central Bank (SIA) Portugal (EDR) - No due date - Debtor bank does not need the mandate (no mandate check) - EDR file format Creditor ID has to be registered with SIBS 4 2010 DB Blue template

Single Euro Payments Area (SEPA): A political Project — 1999: Introduction of the Euro — 2000: EC Financial Services Action Plan — Also known as “Lisbon Agenda” — Comprising 42 measures to create a Single Financial Services Market — 2002: Launch of SEPA initiative by the banking sector — European Payments Council (EPC) — 2008: First step achieved: launch of the SEPA credit transfer — 2009: Second step achieved: launch of the SEPA direct debit Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 55 5 2010 DB Blue template

Scope — Instruments and schemes — — Credit Transfers (since 28 January 2008) Direct Debits (since 2 November 2009) Debit-Card transactions Phase out of national payment schemes (by 2012/13? ) — Market Infrastructure — From various local systems to pan-European clearing houses (PE-ACH’s) — Legal Framework (European Commission) — European Payment Services Directive — Transposition into national law completed in most countries — EU Regulation 924/2009 (formerly 2560/2001) Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 55 6 2010 DB Blue template

Geographic Scope EU – Euro Countries (16) Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia, Slovakia and Spain EU – Non-Euro Countries (11) Bulgaria, Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Sweden, United Kingdom The European Economic Area Iceland, Liechtenstein, Norway and additionally Switzerland, Monaco, Mayotte and St. Pierre-et. Miquelon …only € Transactions! Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 55 7 2010 DB Blue template

SEPA Background SEPA Credit Transfer SEPA Direct Debit SEPA Benefits SEPA Status and Outlook Deutsche Bank Global Transaction Banking

SEPA Credit Transfer Characteristics — Full amount credited to beneficiary – no deductions — Maximum clearing cycle from transaction initiation to credit on the beneficiary account of: — Currently max. 2 days — Max. 1 day from 2012 — Central-bank reporting will continue — Threshold increased to EUR 50 k from January 2010 (EU Reg. 924) — Germany remains at EUR 12, 500 — Not covered by SEPA — Foreign-currency Payments (EU also) — Urgent Payments Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 55 9 2010 DB Blue template

SEPA Credit Transfer New Data Elements — IBAN and BIC to replace account number and national bank code — Payment Detail field length: 140 characters — Optional fields for: — Originator reference (end-to-end reference) — Purpose Codes — The orderer bank must pass them on to the beneficiary bank — The beneficiary bank can optionally display them to the beneficiary — Category Purpose Codes — The orderer and/or the beneficiary bank can optionally offer special processing — E. g. bulk vs. individual booking — For on-behalf-of payments — Originator Reference Party — Beneficiary Reference Party Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 10 2010 DB Blue template

SEPA Background SEPA Credit Transfer SEPA Direct Debit SEPA Benefits SEPA Status and Outlook Deutsche Bank Global Transaction Banking

SEPA Direct Debit Characteristics — Direct debit scheme based on a signed mandate — Content is standardised — Language of debtor country — Creditor captures and maintains mandate data — Relevant mandate data are part of every SDD (creditor mandate flow) — Harmonized collection and exception timelines and rules (so-called R -transactions) Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 12 2010 DB Blue template

SEPA Direct Debit New Data Elements (1) — IBAN & BIC instead of legacy account number & national bank code — Unique mandate number — To be issued by creditor — Country-specific creditor ID — Issuance to be defined per country — Example Germany: via central bank — Mandate — Likely a fictitious date for existing mandates — Remittance Information (Payment Detail) field length: 140 characters Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 13 2010 DB Blue template

SEPA Direct Debit New Data Elements (2) — — Mark as B 2 B or Core SDD Mark as first or one-off direct debit, or as recurrent direct debit Optional creditor reference (end-to-end reference) Optional transaction codes — Purpose Codes — The creditor bank must pass them on to the debtor bank — The debtor bank can optionally display them to the debtor — Category Purpose Codes — The creditor and/or the debtor bank can optionally offer special processing — E. g. bulk vs. individual booking — For on-behalf-of collections — Creditor Reference Party — Debtor Reference Party Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 14 2010 DB Blue template

SEPA Direct Debit Core vs. B 2 B Scheme: Main Differences (1) — Usage — Core SDD: can be used with consumers and companies — B 2 B SDD: can be used with companies only — Status of micro-enterprises to be determined by country — A micro-enterprise is defined as an enterprise which has less than 10 employees and whose annual turnover or balance sheet is equal or less than 2 million Euro (2003/361/EC) — Return right by debtor — Core SDD: 8 weeks after debit — B 2 B SDD: no return right after debit Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 15 2010 DB Blue template

SEPA Direct Debit Core vs. B 2 B Scheme: Main Differences (2) — Mandate check by debtor bank — Core SDD: optional — B 2 B SDD: mandatory — Usage considerations — Acceptance of B 2 B scheme by debtor/debtor bank — Implications on processes (especially if both schemes are used) Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 16 2010 DB Blue template

SEPA Direct Debit Timelines B 2 B Direct Debit Core Direct Debit D: Due date = debtor’s debit date = inter-bank settlement date D-14 CD: Customer pre-notification of amount & due date (unless other timeframe is agreed) D-5 BD: * Submission of first & one-off SDD D-1 BD: Submission of first, one-off and subsequent SDD D+2 BD: Latest date for bank returns D: D-2 BD: * Due date = debtor’s debit date = interbank settlement date Submission of subsequent SDD D+5 BD: Latest date for bank returns D+8 W: Maximum refund period for debtor for authorized transactions D+13 M: Maximum refund period for debtor for unauthorized transactions D+36 M: Mandate expires 36 months after last SDD submission No refund right for debtor D+36 M: Mandate expires 36 months after last SDD submission CD = Calendar Days BD = Business Days W = Weeks M = Months * = optional reduction to D-1 in discussion Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 56 17 2010 DB Blue template

SEPA Direct Debit Mandate Sample Core Scheme Mandate Number Authorization of the debtor‘s bank in addition to the creditor Creditor ID IBAN & BIC Additional examples in “EPC Guidelines for the Appearance of Mandates” from 04. 12. 08: http: //www. europeanpaymentscouncil. eu/k nowledge_bank_list. cfm? documents_categ ory=1 and at: http: //www. europeanpaymentscouncil. eu/c ontent_preview. cfm? page=the_sepa_direct _debit_mandate Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 57 18 2010 DB Blue template

SEPA Direct Debit Mandate Sample B 2 B Scheme Mandate Number Authorization of the debtor‘s bank in addition to the creditor No refund right Creditor ID IBAN & BIC Additional examples in “EPC Guidelines for the Appearance of Mandates” from 04. 12. 08: http: //www. europeanpaymentscouncil. eu/k nowledge_bank_list. cfm? documents_categ ory=1 and at: http: //www. europeanpaymentscouncil. eu/c ontent_preview. cfm? page=the_sepa_direct _debit_mandate Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 57 19 2010 DB Blue template

SEPA Background SEPA Credit Transfer SEPA Direct Debit SEPA Benefits SEPA Status and Outlook Deutsche Bank Global Transaction Banking

Strategic Benefits Trends Rationalization Result: Increased Centralization n Reduction of banking partners/accounts n Seamless IT interfaces n Elimination of paper SEPA Standardization n SWIFT for corporates n XML formats n SEPA Cost Reduction SEPA Collections “on behalf of” Collection factories via SDD Shared Service Centers Payment factories/“on behalf of” payments Centralization of liquidity regionally (In-house banks) Centralization n n Centralized Treasury SSC/Payment factories Single ERP Outsourcing Centralization of liquidity by country Local cash management by subs Risk Control Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59: 58 21 2010 DB Blue template

Account Consolidation Clients need just one account in Europe for making payments and collections SEPA Countries Corporate SEPA Transactions Deutsche Bank Global Transaction Banking 28. 10. 2020 23: 59 22 2010 DB Blue template

Limitation of Centralization with SEPA Geographic / Currencies (only EUR) Instruments (e. g. checks, Ribas, letters of exchange, etc. ) SEPA Potentially legal and tax constraints è Corporates still need Banks able to Support them with Local Services throughout Europe Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 03 23 2010 DB Blue template

SEPA Background SEPA Credit Transfer SEPA Direct Debit SEPA Benefits SEPA Status and Outlook Deutsche Bank Global Transaction Banking

Current Status — 28 January 2008: SEPA Credit Transfer (SCT) went live — More than 4. 400 banks have joined the scheme — Broad reachability achieved (95% of payment volume) — SCT Migration — File conversion by some banks — First clients with “real” XML files — Public sector starts to move — 2 November 2009: SEPA Direct Debit (SDD) went live — Some 3. 000 banks have joined the scheme — Only limited reachability achieved (70% of DD volume) — SDD migration expected to start from November 2010 Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 04 25 2010 DB Blue template

SCT Statistics (1) % of European ACH Volumes Source: ECB — The SCT is not a mass payment instrument yet… Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 04 26 2010 DB Blue template

SCT Statistics (2) XCT vs SCT * Credit transfers that are in line with the convention on credit transfers in euro of the European banking industry, i. e. retail payments of up to 50, 000 euro per transaction. Source: EBA — …but is widely used for cross-border payments Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 04 27 2010 DB Blue template

SDD Statistics Number per Day Source: EBA — SDD volumes are currently negligible — There are various reason for this… Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 05 28 2010 DB Blue template

Dependencies for SCT/SDD Migration 1. 2. 3. 4. 5. End date for existing domestic schemes Reachability of debtor banks Validity of existing mandates Core SDD with D-1 submission deadline Information/education of consumers Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 05 29 2010 DB Blue template

1. End Date for existing domestic Schemes Approach of the European Commission — End-date consultation during summer 2009 — Result: majority favors end dates — End 2009 / Beginning 2010: Resolutions by European Parliament and ECOFIN Council ask Commission for end dates — Working paper for regulation of end dates published in June 2010: — Regulation by EU Commission (to be published in September/October 2010) — End date for EUR credit transfers 1 year after entry into force / 2 years for EUR direct debits — 4 years for both CTs and DDs for non-Euro countries — But only for EUR-transactions — End-to-end format (ISO 20022) regulation (not just inter-bank) — Niche products (<10 % of total volume of an instrument within a country) can be excluded for 3 years after entry into force — EPC rules not considered – instead definition of so-called “Essential Requirements” Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 05 30 2010 DB Blue template

2. Reachability of Debtor Banks (1) — Reachability dependent on EPC adherence process and EU Regulation 924/2009 — EPC Adherence Process: — >3. 000 banks have joined Core SDD scheme - Of that >2. 700 also joined B 2 B scheme - 70% reachability — “Register of Participants”: http: //epc. cbnet. info/content/adherence_database — EBA routing tables — For comparison: — >4. 400 banks have joined SCT scheme — 95% reachability Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 06 31 2010 DB Blue template

2. Reachability of Debtor Banks (2) — Reachability dependent on EPC adherence process and EU Regulation 924/2009 — Regulation 924: — Mandatory reachability for Core SDD for all banks in the Euro-Zone by November 2010 — November 2014 for non-Euro-Zone EEA countries — Optional reachability for B 2 B SDD remains Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 06 32 2010 DB Blue template

3. Validity of existing Mandates — Continued legal validity for Core SDD ensured for most countries — No solution found yet for Germany — Currently, need to obtain new mandates — Due to recent developments in Germany, a solution is expected Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 06 33 2010 DB Blue template

4. Core SDD with shortened Submission Deadline — Of interest for certain countries — D-5/D-2 can potentially have negative effects, e. g: — Delayed liquidity — Increased risk — More complicated processes — D-5/D-2 does not make sense for countries where no mandate check occurs — Status: Under discussion as an AOS in e. g. Germany Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 06 34 2010 DB Blue template

Expected Migration Scenario — Currently: — Slow SCT migration — Voluntary SDD adherence process for banks — Until November 2010: — SDD pilots — Mandatory reachability for Core SDD of all banks in the Euro-zone Corporate Preparation Analysis Budgeting Planning Implementation — From November 2010: — Slow SDD migration — 201? : End of Project — End date for existing domestic instruments — Mass migration to SCT and SDD Deutsche Bank Global Transaction Banking 29. 10. 2020 00: 06 35 2010 DB Blue template