EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 9.10.2008 
SEC(2008)2572 
  
COMMISSION STAFF WORKING DOCUMENT 
Impact Assessment accompanying the 
Draft Proposal for a 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
amending Directive 2000/46/EC on the taking up, pursuit of and prudential supervision 
of the business of electr onic money institutions 
SUMMARY OF THE IMPACT ASSESSMENT  
 
{COM(2008)627 final} 
{SEC(2008)2573} 
EN 2   EN 1. INTRODUCTION  
Directive 2000/46/EC on the taki ng up, pursuit of and prudential supervision of the business 
of electronic money institutions (hereby referred as 'the EMD')1 was adopted in response to 
the emergence of new pre-paid electronic pa yment products, and was intended to create a 
clear legal framework designed to strengthen the Internal Market and stimulate competition whilst at the same time ensuring an ade quate level of prude ntial supervision.  
Electronic money is defined by the EMD, as 'm onetary value as represented by a claim on the 
issuer which is: (i) stored on an  electronic device; (ii) issued on receipt of funds of an amount 
not less in value than the monetary value is sued; (iii) accepted as means of payment by 
undertakings other than the issuer'. 
The EMD seeks to open the market for the issuance of E-money through the creation of 
Electronic Money Institutions (EMIs) regulate d under a lighter prudential regime than that 
required of credit institutions.  
2. P
ROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
On the basis on the EMD's review clause (Article 11), the Commission launched, in 
January 2005, an evaluation exercise. Based on the evaluation study, the Commission adopted 
a Staff working document on the review of th e E-Money Directive (E MD) in July 2006. The 
report concluded that there was a need to revi se the current directive, some provisions of 
which seemed to have hindered the take-up of the e money market. The report also suggested 
awaiting the final adoption of the Payment Serv ices Directive (PSD) before taking further 
action, to permit completion of the complex negotiations on the PSD.  
In order to prepare the present impact assess ment, multiple consultative initiatives were 
undertaken. This included regular discussion s with Member States, the ECB, financial 
institutions, consumer orga nisations, mobile operators, notably through the existing 
consultative committees on retail payments: PSGEG2 and PSMG3 in 2007 and 2008. Next to 
this, a specific meeting with th e e-money industry was held on  25 January 2008 and a specific 
bilateral meeting was held with the ECB on 30  April 2008. Finally, an inter-service working 
group was established in February 2008, with pa rticipation of the Secretariat-General and 
Competition DG, Information Society and Media DG, Economic and Financial Affairs DG, to 
discuss the impact assessment.  
                                                 
1 OJ L 275 of 27.10.2000, p. 39. 
2 The Payment Systems Government Experts Group (PSGEG) is a consultative body composed of 
government experts from Member States of the EEA, typically drawn from national finance ministries 
and national central banks as well as a represen tative from the European Central Bank members as 
observers, with expertise in the payments area with the objective of providing advice and guidance to 
the Commission. 
3 The Payment Systems Market Group  (PSMG) is a consultative body composed of market experts, 
typically drawn from banks, corporates, retailers and associations representing interested stakeholders 
such as SMEs and consumers, with expertise in the payments area with th e objective of providing 
advice and guidance to the Commission. 
EN 3   EN 3. PROBLEM DEFINITION  
The problems identified by the evaluation and the consultation process can be grouped in two 
main problem strands. The first problem strand refers to the unclear  definition of electronic 
money and the scope of the directive , leading to legal uncertainty and hindering the 
development of the market. The second refers to the inadequate legal framework . This last 
point includes the prud ential regime, the waivers and passporting regime as well as the 
application of anti money la undering rules to e-money se rvices. This overall legal 
inconsistency will increase once the Payment Services Directive is implemented (by 
November 2009), since some provisions of th e latter are incompatib le with the EMD. 
These problems have resulted in a limited market uptake  for electronic money in Europe, in 
terms of volume of e-money issued and in term s of number of market  participants, with e-
money representing EUR 1 billion in comparison w ith 637 billion of cash in circulation as of 
August 2007. 
3.1. The lack of legal certainty and the sc ope of the directive hampers market 
development 
During the review process, stak eholders expressed concerns th at the current directive lacks 
legal certainty due to an unclear definiti on of e-money and scope  of the directive. 
3.1.1.  The definition of e-money is unclear 
The definition of 'e-money' requires it to be 'sto red on an electronic device'. This definition is 
therefore considered technica lly limited to one form of e-money (notably cards based 
electronic money) and does not encompass the va rious pre-paid produc ts available in the 
market (e.g., 'server-based' e-money). The current definition also raises  questions in cases 
where the value stored would be less than the amount actually paid to th e issuer, disqualifying 
in principle such products from  being defined as e-money.  
3.1.2.  The scope of the EMD prevents new market entrants  
The application of the directive to mobile ope rators and issuers of electronic vouchers would 
have a huge impact on the number of market participants and on th e amount of electronic 
money in circulation as they would be enab led to design new services. According to the 
stakeholders consulted, the current lack of cl arity prevents the development of these two 
markets.  
3.1.3.  The activities of EMIs are too narrowly defined 
The activities of electronic money institutions ar e restricted under Article 1(4) of the EMD to 
issuing electronic money and cl osely related services. This provision differs from the non-
exclusivity approach of the PSD, where a paym ent institution can e ngage in non-payment 
services business (e.g. retailing or telecom act ivities). Under the EMD, 'hybrid institutions' 
such as telecom operators and retailers have to split up their business in different legal entities which can be costly and inefficient. 
3.1.4.  Redeemability 
Article 3 of the EMD states that a bearer of electronic money ma y, during the period of 
validity, ask the issuer to redeem it at par value in coins and bank notes or by a transfer to an 
EN 4   EN account free of charges other than those stric tly necessary to carry out that operation. 
Redeemability was inserted in the EMD for c onsumer protection reasons, to ensure that 
customers can get at all times their money bac k. Redeemability appears to pose a problem for 
Mobile Network Operators (MNOs) and electroni c vouchers' issuers. Mobile operators are 
unable to split 'ex ante' customers' prepaid f unds for mobile services and electronic money.  
3.2. An inconsistent legal framework 
Although it is widely acknowledged that the EMD has provided non-banks with an 
opportunity to enter the e-money market-place, the review report showed that high capital 
requirements, as well as certain restricti ons and requirements imposed by the EMD, have 
hindered the development of the e-money ma rket. The adoption of the PSD, which is 
currently being transposed into national legi slation, will increase th e complexity and the 
inconsistency of the overall le gal framework and eventually lead to an absence of level 
playing field between payment institutions and EMIs. 
3.2.1.  The prudential regime 
Prudential requirements have as objective to ensure sound and prudent operations of 
electronic money institutions. The review proces s provided evidence that certain requirements 
are disproportionate to the risks posed by EMIs. This evidence is reinforced if the cumulative effects of the overall regime are considered. The problems on the prudential regime include: 
• current initial capital requirement of EUR 1 million  is deemed by a number of 
stakeholders to be too high and disproportionate with regard to the risk of the service. This 
high initial capital is an obstacle for smalle r firms wishing to apply for an EMI license. 
• The 2 % own funds requirement  does not in itself appear to  have given rise to major 
difficulties for authorised EMIs, although its combination with other aspects of the EMD 
(e.g. initial capital, limitation of investments,  restriction of activ ities) have led to 
complaints that the overall regime is excessive. 
• The limitations of investment , under which EMIs are required to have investments which 
at least match their financial liabilities rela ted to outstanding elec tronic money. Bank and 
credit card receivables are excluded from the li st of eligible investme nts. Evidence showed 
that current limitations of investments lead s for growing companies to more stringent 
capital requirements then those for credit  institutions under the capital requirements 
directive.  
3.2.2.  Inconsistent implementati on of some provisions 
3.2.2.1.  Inconsistent application of waivers 
Under the EMD, Member States are allowed to  waive some or all of the authorisation 
requirements for small EMIs in order to facilita te market entry and innovation by new players 
without subjecting them to the full rigours of the authorisation framework. This option has 
been applied inconsistently be tween Member States and four of them have not implemented 
the waiver at all. The current situation might lead to competitive distortions within national 
borders.  
EN 5   EN 3.2.2.2.  Passporting 
The passporting regime allows EM Is to go cross bor der and conduct the same business in host 
Member States as they are entitled to conduc t in their home Member State under the EMI 
licence, without additional hind rances. However, Article 2 of  the EMD refers to certain 
articles in the CRD providing fo r the authorisation of branches  in other Member States and 
setting out the scope of permitted activities. According to some stakeholders, additional 
requirements imposed in some Member States in crease the complexity and eventually hinder 
EMIs to set up branches in  other Member States.  
3.2.2.3.  Anti-Money Laundering Rules 
The EMD contains no specific provision s covering anti-money laundering. However, 
Directive 2005/60/EC on anti money laundering(AM L) does introduces a simplified customer 
due diligence regime which applies to e-mone y, From a consumer's point of view, these 
'Know Your Customer' (KYC) re quirements prove to be cumbersome and impractical. From a 
business point of view, these re quirements, and the costs associ ated with addressing them, 
might pose a significant challenge to the bus iness case for this type of services. 
4. THE OBJECTIVES  
The general objective  of the review of the EMD is to promote the emergence of a true single 
market for electronic money services in Europe . Contribute to the desi gn and implementation 
of new, innovative and secure electronic mo ney services. Provide market access to new 
players and real and effective competition between all market participants, thereby generating 
significant benefits to the wider European economy.  
In order to achieve this general objective, two operational objectives  were defined: a 
clarification of the definition and scope of el ectronic money services and electronic money 
institutions and the assurance of consistency wi th the PSD, creating a true level playing field 
for all market participants. This would lead in  the medium term to the achievement of the 
specific objectives  which aim to enhance legal certainty for all service providers, to create a 
harmonised legal framework and to promote the development of new and innovative services.  
5. THE POLICY OPTIONS AND THE POLICY INSTRUMENTS  
A wide range of solutions have been consider ed to address the problems affecting e-money 
services and meet the objectives that have  been defined. The two main problems, as 
mentioned in chapter three are caused by issues related to: 
1. The definition of e-money and scope of the EMD (first problem strand) 
2. The inadequacy of the legal framework (namely: prudential regime, waivers and 
anti-money laundering rules). 
Based on an initial screening of the different policy options against th e policy objectives the 
policy options have been grouped in  concrete packages which are a selection of in itiatives that 
can be taken. The following packages were evaluated:  
• Package 1: Keep the EMD as it is ('do nothing'  approach) 
EN 6   EN This is the so-called 'baseline scenario'. In th is option there would be no legislative proposal  
• Package 2: Issue a guidance note on the sc ope and definition of electronic money 
Under this non-legally binding op tion a guidance note would be i ssued to clarify the current 
definition and scope of el ectronic money institutions. 
• Package 3: Align with PSD, applying the pr udential regime of Payment Institutions to 
EMIs 
This option would mean the design a legal fr amework which is consistent with the PSD 
applying the prudential requirements of Paymen t Institutions to EMI. This could be 
implemented by amending the EMD or the PSD. 
• Package 4: Align with the PSD, with  specific prudential regime for EMIs  
Package 4 is almost the same as Package 3 ex cept from the specific prudential regime for 
EMIs. This could be implemente d by amending the EMD or the PSD 
• Package 5: Repeal the EMD directive 
Under this package, the EMD di rective would be repealed.  
6. IMPACT OF THE PACKAGES  
Based on the evaluation of the packages, we cons ider that an alignment with the PSD, as 
suggested in Package 3  and Package 4, is the most appropriate way forward . Both packages 
are expected to have a positive impact on the uptake of the e-money market in terms of e-money in circulation (a potential increase up to  EUR 10 billion) and in number of institutions 
(up to 120 EMIs) 
The main advantages of Package 4 are the av ailability of a specific prudential regime 
commensurate with the risks posed by electronic money institutions and the maintenance of the existing reporting requirements for EMIs to ensure market monitoring and compliance 
with the prudential requirements. The disadvant age is a higher administrative burden, which 
remains however proportionate to its objective.  
Package 3, applying the prudentia l requirements of payment institutions would have the 
advantage that it would lowe r the administrative burden as no reporting would be required. 
The main disadvantage is that this complicates  market monitoring. In addition its prudential 
regime is indirectly linked to the risks of electronic money institutions by means of payment volume as electronic money is used to execute payment transactions. 
Package 1, 'do nothing' or Package 2, 'guidance note' would maintain the complexity of the 
legal framework after the tran sposition of the PSD in 2009 a nd would hinder further market 
development. Package 5, 'repeal of the dir ective' would simplify the legal framework, 
however creating legal uncertainty and hinderi ng the development of new electronic money 
services.  
EN 7   EN 7. EVALUATION AND MONITORING  
A first intermediate evaluation could be performe d on the moment of the first review of the 
PSD, three years after its transposition. Second, no later then five years after implementation, 
the Commission services will present an evaluation report on the legislative initiative.  
Thus, the forthcoming legislation will be subject to a complete evaluation in order to assess, 
among other things, how effective and efficien t it has been in te rms of achieving the 
objectives presented in this impact assessment and to decide whether new measures or amendments are needed. The Commission will also consider the integration of the Directive 
into the payment services directive.