On 5 September 2018, HM Treasury published the draft Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 (the Regulations), together with an explanatory memorandum. The Regulations were published in conjunction with the Draft Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018.
Schedule 3 of the Regulations is of particular note, creating a temporary permissions regime (the TPR) for payment institutions and e-money institutions. Payment and e-money institutions in the TPR are required to comply with requirements to safeguard UK customer funds under the Payment Services Regulations (PSR), or the Electronic Money Regulations (EMR) (where applicable). This differs from the temporary permissions regime for firms regulated under FSMA (see here).
Many payment and e-money institutions participating in the TPR will also have to establish a UK subsidiary to be able to offer new business in the UK after the end of the TPR – however an EEA firm’s temporary permission will not fall away automatically on the authorisation of the subsidiary, in recognition of the time it takes for a subsidiary to become fully operational. Crucially, Schedule 3 of the Regulations provides the following:
- for those regulated under the EMR, who would otherwise be unable to exercise their currently passported right as an EEA authorised electronic money institution after exit day – a notification to the FCA will be required during the 3 months ending with the day preceding the day on which exit day falls. The duties of those relying on these transitional provisions, as well as the FCA’s power to cancel transitional authorisations, are provided; and
- for those regulated under the PSR who would be unable to provide their currently passported services following Brexit day – provisions are introduced mirroring those created for persons regulated under the EMR (above).
Further inclusions within the Regulations of note are:
- amendments to the EMR and PSR to take into account the UK’s position as a third country after Brexit day;
- provisions to allow Gibraltar-based payment services and e-money institutions to access the UK markets;
- amendments to the PSR to allow for the Treasury to make amendments to regulations under the Single Euro Payments Area (SEPA), in the instance that the SEPA Regulation is revoked under Part 4 of the Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018. (See Part 2 Schedule 2); and
- provisions to ensure access to segregated safeguarding by allowing institutions to hold safeguarding accounts anywhere in the world, providing the institutions meet specific criteria.