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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 reportingobligations
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 Courtneidge Siobhan Moore
Global Head – Cards & Payments Senior Associate
London London
t. +44 20 7429 6074 t. +44 20 7429 6159
f. +44 20 7429 6374 f. +44 20 7429 6459
