On 7 August 2025, the Financial Conduct Authority (FCA) published a Policy Statement, PS25/12, setting out changes to the safeguarding regime for payments and e-money firms. The FCA has also published its related amendments to ‘Payment Services and Electronic Money – Our Approach’.

Background

In January 2023, HM Treasury published its Payment Services Regulations Review and Call for Evidence. The FCA’s subsequent CP24/20 (published in September 2024) set out proposed changes intended to improve the safeguarding regime and make customer funds safer.

CP24/20 proposed making the changes in two stages. The first stage involved ‘interim rules’ (the Supplementary Regime) which would support the existing legislative safeguarding provisions in the Electronic Money Regulations 2011 (EMRs) and Payment Services Regulation 2017 (PSRs) to encourage a greater level of compliance with existing safeguarding requirements. The second stage would be the ‘end-state rules’ (the Post-Repeal Regime) which would replace the safeguarding requirements of the EMRs and PSRs with a client assets (CASS) style regime if, and when, the existing safeguarding requirements in the EMRs and PSRs are repealed.

Key changes

The FCA has now finalised its rules and guidance under the Supplementary Regime which include:

  • Improved books and records: Requirements for payments firms to perform safeguarding reconciliations at least once each day other than weekends, public holidays and days when relevant foreign markets are not open. Payments firms will also be required to maintain a resolution pack which includes the types of documents and records to enable payments firms to return relevant funds to customers should the payments firm enter into an insolvency procedure.
  • Enhanced monitoring and reporting: The FCA have confirmed requirements for certain authorised payment institutions and electronic money institutions to arrange annual audits of their safeguarding compliance carried out by a qualified auditor and for payments firms to submit a new monthly regulatory return to the FCA relating to their safeguarding arrangements. It also has finalised its guidance on the FCA’s expectations around safeguarding audits for payments firms that are not required to arrange them.
  • Strengthening elements of safeguarding: A requirement for payments firms to carry out due diligence when appointing or periodically reviewing third parties that manage or hold relevant funds or assets, that payment firms continue to be able to invest funds in the same range of assets that they can now and are required to ensure there are no conditions or restrictions on safeguarding insurance policies or guarantees paying out. Firms are also required to have a contingency plan at least 3 months before a safeguarding insurance policy or comparable guarantee expires and to be ready to safeguard through the segregation method if a replacement policy is not in place.

The FCA has also included the following amendments in its updated Approach Document to reflect the changes to rules and guidance in:

  • CASS 10A on requirements for maintaining resolution packs.
  • CASS 15 on safeguarding relevant funds.
  • Supervision manual (SUP) 3A on auditors’ safeguarding reports.
  • SUP 16.14A on the form, content, reporting period and due dates for safeguarding returns.

Next steps

The final rules and guidance under the Supplementary Regime and related amendments to the Approach Document will come into force on 7 May 2026.