Regulation update: PSD and EMD 6 October 2009 Siobhan Moore
Agenda Payment Services Directive New Electronic Money Directive
Payment Services Directive Implemented into UK under Payment Services Regulations 2009 (PSR) In force 1 November 2009 Affects banks, building societies, e-money issuers, money remitters, non- bank credit card issuers and non-bank merchant acquirers Creates a new class of regulated firms – Payment Institutions (PI) who must be authorised by or registered with the FSA
Payment Services Directive PIs are subject to prudential requirements: compliance, monitoring and reporting obligations Activities caught by the PSR are set out in Schedule 1 Exempted activities: Commercial agents Technical service providers Limited network Value added operators of telecoms, digital or IT devices
Payment Services Directive Issuing e-money E-money issuers are excluded from being a PI Programme Managers: may be excluded if are technical service providers (and do not touch the funds) OR agents BUT subject to conduct of business regime under PSR – provision of information and rights of customer
New E-money Directive So where are we now? New e-money regulations in UK by 2011 Aim – regulations shall be clear, balanced and remove unnecessary barriers to market entry Shall be aligned with the PSR
New E-money Directive Highlights Definition of e-money: Simpler definition leaving less space to interpretation Scope of new EMD: EXCLUDES prepaid instruments that can only be used in a limited way i.e. purchase of goods/services only in the e-money issuer’s premises or within a limited network under direct commercial agreement with a professional issuer or because they can be used only to acquire a limited range of goods or services eg store cards, petrol cards, membership cards, public transport cards and meal vouchers or vouchers for services..which are subject to a specific tax or labour legal framework designed to promote the use of such instruments to meet the objectives laid down in social legislation. BUT where such a specific purpose instrument develops into a general purpose instrument this exemption NO LONGER APPLIES. Capital Requirements: Reduced from 1 million Euros to 350,000 Euros and new rules of calculation of own funds
New E-money Directive Highlights Prudential regime: Current form considered excessive in relation to risks relating to activity of issuing e-money. New directive aims at ensuring consistency with the lighter prudential regime applicable to payment institutions under PSR Business Restrictions: Relaxation of the current regime to permit e-money issuers to carry on non-payment services Redeemability of funds: Consumers now have right to claim e-money back at all times and conditions for charging customers are specified Anti money laundering rules: Simplified Due Diligence thresholds are increased. Changes in the anti-money laundering rules aimed at keeping identification and record- keeping requirements proportionate to the low average amounts involved in e-money transactions
Contact Robert CourtneidgeSiobhan Moore Global Head – Cards & Payments Senior AssociateLondon t t f f