The pursuit and prudential supervision of the business of electronic money institutions

This Directive aims to allow non-bank institutions to issue electronic money while preserving their financial integrity and operating on a level-playing field with other credit institutions.

ACT

Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking-up, pursuit of and prudential supervision of the business of electronic money institutions.

SUMMARY

The Directive authorises non-bank institutions to issue electronic money provided that it is on a non-professional basis.

It defines this new mode of payment neutrally as a surrogate for coins and banknotes which is stored on an electronic device (chip card or computer memory) and intended for making payments of limited amounts.

The Directive regulates free movement within this sub-sector of financial services by applying to it the basic rules on credit institutions.

Electronic money institutions may be granted the "European passport" (single licence) if they comply with the principles laid down in the First Banking Directive as regards mutual recognition of the licence and prudential supervision and with the principle of home Member State supervision (Directive 2000/12/EC).

Like banks, they must preserve bearer confidence by redeeming electronic money at par value in coins and bank notes or by transfer (without charge).

To ensure consistency in terms of the prevention of organised crime, electronic money institutions must also comply with the objectives of the Directive on prevention of the use of the financial system for the purpose of money laundering (Directive 91/308 and Directive 2000/12/EC).

Lastly, like credit institutions, institutions issuing electronic money must have a sound administrative and accounting system and internal control mechanisms.

However, the obligations on electronic money institutions are not as heavy as those imposed on banks. For example, they are not required to comply with the rules on deposit-taking if the funds received are immediately exchanged for electronic money.

Likewise, they are not required to comply with the legislation on bank guarantees, since the funds received are not considered to constitute "deposits" (Directive 94/19/EC and Directive 2000/12/EC).

The Directive also introduces a prudential supervisory system for electronic money institutions that is separate from that applicable to banks, despite being modelled on it (Directive 2000/12/EC), in that it is more specific and less complex. For example, initial capital requirements are less stringent (EUR 1 million instead of the EUR 5 million required of banks), as are own funds requirements (2% of financial liabilities related to outstanding electronic money).

However, this simplification of financial supervision is offset by the fact that electronic money institutions are subject to tighter restrictions than credit institutions as regards the scope of their activities and investment.

Lastly, in order to ensure a certain degree of flexibility, the competent authorities may waive the application of some or all of the provisions of the Directive to electronic money institutions whose activities are limited or local.

Not later than 27 April 2005 the Commission must present a report to the European Parliament and the Council on the application of the Directive.

RELATED ACTS

Proposal for a Directive of the European Parliament and of the Council on the taking up, pursuit and prudential supervision of the business of electronic money

institutions, amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC [COM(2008) 627 final].

This Proposal, which aims to repeal Directive 2006/46/EC, revises the current rules governing the issuing of electronic money in the European Union. The Proposal follows extensive consultation (see IP/05/930) which showed that the current rules, dating from 2000, have hindered the development of the electronic money market and hampered technological innovation.

The Proposal presents a modern and coherent legal framework for issuing electronic money, with the aim of promoting the emergence of a true single market for electronic payment services in the European Union.

The main innovations proposed are as follows:

• a technically neutral and simpler definition of ‘electronic money’, covering all situations where an electronic money institution issues a prepaid stored value in exchange of funds;
• a new prudential regime ensuring greater consistency between prudential requirements of electronic money institutions and payment institutions under the Payment Services Directive 2007/64/EC.

Codecision procedure (COD/2008/0190).

Last updated: 16.12.2008