COMMON POSITION (EC) No 8/2000

adopted by the Council on 29 November 1999

with a view to adopting a Directive 2000/.../EC of the European Parliament and of the Council of ... on the taking-up, pursuit of and prudential supervision of the business of electronic money institutions

(2000/C 26/01)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular the first and third sentences of Article 47(2) thereof,

Having regard to the proposal from the Commission(1),

Having regard to the opinion of the Economic and Social Committee(2),

Having regard to the opinion of the European Central Bank(3),

Acting in accordance with the procedure laid down in Article 251 of the Treaty(4),

Whereas:

(1) credit institutions within the meaning of Article 1, first indent, (b) of Council Directive 77/780/EEC(5), are limited in the scope of their activities;

(2) it is necessary to take account of the specific characteristics of these institutions and to provide the appropriate measures necessary to coordinate and harmonise Member States' laws, regulations and administrative provisions relating to the taking-up, pursuit and prudential supervision of the business of electronic money institutions;

(3) for the purposes of this Directive, electronic money can be considered an electronic surrogate for coins and banknotes which is stored on an electronic device such as a chip card or computer memory and which is generally intended for the purpose of effecting electronic payments of limited amounts;

(4) the approach adopted is appropriate to achieve only the essential harmonisation necessary and sufficient to secure the mutual recognition of authorisation and prudential supervision of electronic money institutions, making possible the granting of a single licence recognised throughout the Community and designed to ensure bearer confidence and the application of the principle of home Member State prudential supervision;

(5) within the wider context of the rapidly evolving electronic commerce it is desirable to provide a regulatory framework that assists electronic money in delivering its full potential benefits and that avoids hampering technological innovation in particular; therefore, this Directive introduces a technology-neutral legal framework that harmonises the prudential supervision of electronic money institutions to the extent necessary for ensuring their sound and prudent operation and their financial integrity in particular;

(6) credit institutions, by virtue of point 5 of the Annex to Council Directive 89/646/EEC(6), are already allowed to issue and administer means of payment including electronic money and to carry on such activities Community-wide subject to mutual recognition and to the comprehensive prudential supervisory system applying to them in accordance with the European banking directives;

(7) the introduction of a separate prudential supervisory regime for electronic money institutions, which, although calibrated on the prudential supervisory regime applying to other credit institutions and Directives 77/780/EEC and 89/646/EEC in particular, differs from that regime, is justified and desirable because the issuance of electronic money does not constitute in itself, in view of its specific character as an electronic surrogate for coins and banknotes, a deposit-taking activity pursuant to Article 3 of Directive 89/646/EEC, if the received funds are immediately exchanged for electronic money;

(8) the receipt of funds from the public in exchange for electronic money, which results in a credit balance left on account with the issuing institution, constitutes the receipt of deposits or other repayable funds for the purpose of Directives 77/780/EEC and 89/646/EEC;

(9) it is necessary for electronic money to be redeemable to ensure bearer confidence; redeemability does not imply, in itself, that the funds received in exchange for electronic money shall be regarded as deposits or other repayable funds for the purpose of Directives 77/780/EEC and 89/646/EEC;

(10) in order to respond to the specific risks associated with the issuance of electronic money this prudential supervisory regime must be more targeted and, accordingly, less cumbersome than the prudential supervisory regime applying to credit institutions, notably as regards reduced initial capital requirements and the non-application of Council Directives 89/647/EEC(7), 92/121/EEC(8) and 93/6/EEC(9);

(11) however, it is necessary to preserve a level playing field between electronic money institutions and other credit institutions issuing electronic money and, thus, to ensure fair competition among a wider range of institutions to the benefit of bearers; this is achieved since the abovementioned less cumbersome features of the prudential supervisory regime applying to electronic money institutions are balanced by provisions that are more stringent than those applying to other credit institutions, notably as regards restrictions on the business activities which electronic money institutions may carry on and, particularly, prudent limitations of their investments aimed at ensuring that their financial liabilities related to outstanding electronic money are backed at all times by sufficiently liquid low-risk assets;

(12) pending the harmonisation of prudential supervision of outsourced activities for credit institutions it is appropriate that electronic money institutions have sound and prudent management and control procedures; with a view to the possibility of operational and other ancillary functions related to the issuance of electronic money being performed by undertakings which are not subject to prudential supervision it is essential that electronic money institutions have in place internal structures which should respond to the financial and non-financial risks to which they are exposed;

(13) the issuance of electronic money may affect the stability of the financial system and the smooth operation of payment systems; close cooperation in assessing the integrity of electronic money schemes is called for;

(14) it is appropriate to afford competent authorities the possibility of waiving some or all of the requirements imposed by this Directive for electronic money institutions which operate only within the territories of the respective Member States;

(15) adoption of this Directive constitutes the most appropriate means of achieving the desired objectives; this Directive is limited to the minimum necessary to achieve these objectives and does not go beyond what is necessary for this purpose;

(16) provision should be made for the review of this Directive in the light of experience of developments in the market and the protection of bearers of electronic money;

(17) the Banking Advisory Committee has been consulted on the adoption of this Directive,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Scope, definitions and restriction of activities

1. This Directive shall apply to electronic money institutions.

2. It shall not apply to the institutions referred to in Article 2(2) of Directive 77/780/EEC.

3. For the purposes of this Directive:

(a) "electronic money institution" shall mean an undertaking or any other legal person, other than a credit institution as defined in Article 1, first indent, paragraph (a) of Directive 77/780/EEC which issues means of payment in the form of electronic money;

(b) "electronic money" shall mean monetary 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 issued;

(iii) accepted as means of payment by undertakings other than the issuer.

4. Member States shall prohibit persons or undertakings that are not credit institutions, as defined in Article 1, first indent of Directive 77/780/EEC, from carrying on the business of issuing electronic money.

5. The business activities of electronic money institutions other than the issuing of electronic money shall be restricted to:

(a) the provision of closely related financial and non-financial services such as the administering of electronic money by the performance of operational and other ancillary functions related to its issuance, and the issuing and administering of other means of payment but excluding the granting of any form of credit; and

(b) the storing of data on the electronic device on behalf of other undertakings or public institutions.

Electronic money institutions shall not have any holdings in other undertakings except where these undertakings perform operational or other ancillary functions related to electronic money issued or distributed by the institution concerned.

Article 2

Application of banking directives

1. Save where otherwise expressly provided for, only references to credit institutions in Directives 77/780/EEC, 89/646/EEC, 91/308/EEC(10) and 92/30/EEC shall apply to electronic money institutions.

2. Article 2(5) and (6), Article 3(3)(b), (c) and (d) and (7), Articles 4, 6, 7(2) and (3), Article 8(2), (3) and (4), Articles 10 and 14 of Directive 77/780/EEC and Articles 4, 6, 10, 12, 18(2), 23 and 24 of Directive 89/646/EEC shall not apply. The mutual recognition arrangements provided for in Directive 89/646/EEC shall not apply to electronic money institutions' business activities other than the issuance of electronic money.

3. The receipt of funds within the meaning of Article 1(3)(b)(ii) does not constitute a deposit or other repayable funds according to Article 3 of Directive 89/646/EEC, if the funds received are immediately exchanged for electronic money.

Article 3

Redeemability

1. A bearer of electronic money may, during the period of validity, ask the issuer to redeem it in coins and bank notes or by a transfer to an account free of charges other than those strictly necessary to carry out that operation.

2. The contract between the issuer and the bearer shall clearly state the conditions of redemption.

3. The contract may stipulate a minimum threshold for redemption. The threshold may not exceed EUR 10.

Article 4

Initial capital and ongoing own funds requirements

1. Electronic money institutions shall have an initial capital, as defined in Article 2(1)(1) and (2) of Council Directive 89/299/EEC of 17 April 1989 on the own funds of credit institutions(11), of not less than EUR 1 million. Notwithstanding paragraphs 2 and 3, their own funds, as defined in Directive 89/299/EEC, shall not fall below that amount.

2. Electronic money institutions shall have at all times own funds which are equal to or above 2 % of the higher of the current amount or the average of the preceding six months' total amount of their financial liabilities related to outstanding electronic money.

3. Where an electronic money institution has not completed a six months' period of business, including the day it starts up, it shall have own funds which are equal to or above 2 % of the higher of the current amount or the six months' target total amount of its financial liabilities related to outstanding electronic money. The six months' target total amount of the institution's financial liabilities related to outstanding electronic money shall be evidenced by its business plan subject to any adjustment to that plan having been required by the competent authorities.

Article 5

Limitations of investments

1. Electronic money institutions shall have investments of an amount of no less than their financial liabilities related to outstanding electronic money in the following assets only:

(a) asset items which according to Article 6(1)(a)(1), (2), (3), (4) and Article 7(1) of Directive 89/647/EEC attract a zero credit risk weighting and which are sufficiently liquid;

(b) sight deposits held with zone A credit institutions as defined in Directive 89/647/EEC; and

(c) debt instruments which are:

(i) sufficiently liquid;

(ii) not covered by paragraph 1(a);

(iii) recognised by competent authorities as qualifying items within the meaning of Article 2(12) of Directive 93/6/EEC; and

(iv) issued by undertakings other than undertakings which have a qualifying holding, as defined in Article 1 of Directive 89/646/EEC, in the electronic money institution concerned or which must be included in those undertakings' consolidated accounts.

2. Investments referred to in paragraph 1(b) and (c) may not exceed 20 times the own funds of the electronic money institution concerned and shall be subject to limitations which are at least as stringent as those applying to credit institutions in accordance with Directive 92/121/EEC.

3. For the purpose of hedging market risks arising from the issuance of electronic money and from the investments referred to in paragraph 1, electronic money institutions may use sufficiently liquid interest rate and foreign-exchange-related off balance-sheet items in the form of exchange-traded (i.e. not OTC) derivative instruments to which Annex II to Directive 89/647/EEC does not apply. The use of derivative instruments according to the first sentence is permissible only if the full elimination of market risks is intended and, to the extent possible, achieved.

4. Member States shall impose appropriate limitations on the market, risks electronic money institutions may incur from the investments referred to in paragraph 1.

5. For the purpose of applying paragraph 1, assets shall be valued at the lower of cost or market value.

6. If the value of the assets referred to in paragraph 1 falls below the amount of financial liabilities related to outstanding electronic money, the competent authorities shall ensure that the electronic money institution in question takes appropriate measures to remedy that situation promptly. To this end, and for a temporary period only, the competent authorities may allow the institution's financial liabilities related to outstanding electronic money to be backed by assets other than those referred to in paragraph 1 up to an amount not exceeding the lower of 5 % of these liabilities or the institution's total amount of own funds.

Article 6

Verification of specific requirements by the competent authorities

The competent authorities shall ensure that the calculations justifying compliance with Articles 4 and 5 are made, not less than twice each year, either by electronic money institutions themselves, which shall communicate them, and any component data required, to the competent authorities, or by competent authorities, using data supplied by the electronic money institutions.

Article 7

Sound and prudent operation

Electronic money institutions shall have sound and prudent management, administrative and accounting procedures and adequate internal control mechanisms. These should respond to the financial and non-financial risks to which the institution is exposed including technical and procedural risks as well as risks connected to its cooperation with any undertaking performing operational or other ancillary functions related to its business activities.

Article 8

Waiver

1. Member States may allow their competent authorities to waive the application of some or all of the provisions of this Directive and the application of Directives 77/780/EEC and 89/646/EEC to electronic money institutions in cases where either:

(a) the total business activities of the type referred to in Article 1(3)(a) of this Directive of the institution generate a total amount of financial liabilities related to outstanding electronic money that normally does not exceed EUR 5 million and never exceeds EUR 6 million; or

(b) the electronic money issued by the institution is accepted as a means of payment only by any subsidiaries of the institution which perform operational or other ancillary functions related to electronic money issued or distributed by the institution, any parent undertaking of the institution or any other subsidiaries of that parent undertaking; or

(c) electronic money issued by the institution is accepted as payment only by a limited number of undertakings, which can be clearly distinguished by:

(i) their location in the same premises or other limited local area; or

(ii) their close financial or business relationship with the issuing institution, such as a common marketing or distribution scheme.

The underlying contractual arrangements must provide that the electronic storage device at the disposal of bearers for the purpose of making payments is subject to a maximum storage amount of not more than EUR 150.

2. An electronic money institution for which a waiver has been granted under paragraph 1 shall not benefit from the mutual recognition arrangements provided for in Directive 89/646/EEC.

3. Member States shall require that all electronic money institutions to which the application of this Directive and Directive 77/780/EEC and 89/646/EEC has been waived report periodically on their activities including the total amount of financial liabilities related to electronic money.

Article 9

Grandfathering

Electronic money institutions subject to this Directive which have commenced their activity in accordance with the provisions in force in the Member State in which they have their head office before the date of entry into force of the provisions adopted in implementation of this Directive or the date referred to in Article 10(1), whichever date is earlier, shall be presumed to be authorised. The Member States shall oblige such electronic money institutions to submit all relevant information to the competent authorities in order to allow them to assess within six months from the date of entry into force of the provisions adopted in implementation of this Directive, whether the institutions comply with the requirements pursuant to this Directive, which measures need to be taken in order to ensure compliance, or whether a withdrawal of authorisation is appropriate. If compliance is not ensured within six months from the date referred to in Article 10(1), the electronic money institution shall not benefit from mutual recognition after that time.

Article 10

Implementation

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than ...(12). They shall immediately inform the Commission thereof.

When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such a reference shall be laid down by the Member States.

2. Member States shall communicate to the Commission the text of the main provisions of national law, which they adopt in the field covered by this Directive.

Article 11

Review

Not later than ...(13) the Commission shall present a report to the European Parliament and the Council on the application of this Directive, in particular on:

- the measures to protect the bearers of electronic money, including the possible need to introduce a guarantee scheme,

- capital requirements,

- waivers, and

- the possible need to prohibit interest being paid on funds received in exchange for electronic money,

accompanied where appropriate by a proposal for its revision.

Article 12

Entry into force

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

Article 13

This Directive is addressed to the Member States.

Done at Brussels, ...

For the European Parliament

...

The President

For the Council

...

The President

(1) OJ C 317, 15.10.1998, p. 7.

(2) OJ C 101, 12.4.1999, p. 64.

(3) OJ C 189, 6.7.1999, p. 7.

(4) Opinion of the European Parliament of 15 April 1999 (OJ C 219, 30.7.1999, p. 415), Council common position of 29 November 1999 and Decision of the Parliament of ... (not yet published in the Official Journal).

(5) First Council Directive 77/780/EEC of 12 December 1977 on the coordination of the laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of credit institutions (OJ L 322, 17.12.1977, p. 30). Directive as last amended by European Parliament and Council Directive 1999/.../EC (OJ L ...).

(6) Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of credit institutions and amending Directive 77/780/EEC (OJ L 386, 30.12.1989, p. 1). Directive as amended by Directive 92/30/EEC (OJ L 110, 28.4.1992, p. 52).

(7) Council Directive 89/647/EEC of 18 December 1989 on a solvency ratio for credit institutions (OJ L 386, 30.12.1989, p. 14). Directive as last amended by Directive 98/33/EC (OJ L 204, 21.7.1998, p. 29).

(8) Council Directive 92/121/EEC of 21 December 1992 on the monitoring and control of large exposures of credit institutions (OJ L 29, 5.2.1993, p. 1). Directive as amended by the 1994 Act of Accession.

(9) Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions (OJ L 141, 11.6.1993, p. 1). Directive as last amended by Directive 98/33/EC.

(10) Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (OJ L 166, 28.6.1991, p. 77).

(11) OJ L 124, 5.5.1989, p. 16. Directive as last amended by Directive 92/30/EEC.

(12) 18 months after the date of entry into force of this Directive.

(13) 54 months after the date of entry into force of this Directive.

STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

1. On 22 September 1998, the Commission forwarded to the Council a proposal for a Directive on the taking-up, pursuit and prudential supervision of the business of electronic money institutions based on Article 47(2) of the EC Treaty, in particular the first and third sentences thereof.

The European Parliament gave its opinion on the first reading of the proposal on 15 April 1999. The Economic and Social Committee gave its opinion on 27 January 1999 and the European Central Bank gave its opinion on 18 January 1999.

2. On 29 November 1999, the Council adopted its common position pursuant to Article 251 of the Treaty.

II. OBJECTIVE

The Directive introduces a special supervisory regime for issuers of electronic money. This regime is based on the existing prudential supervisory regime applicable to credit institutions, but differs from that in order to respond to the specific risks associated with the issuance of electronic money. The aim is to introduce a technology-neutral legal framework that harmonises the prudential supervision of electronic money institutions so as to ensure their sound and prudent operation and their financial integrity. At the same time it aims to provide a regulatory framework that enables electronic money to deliver its full potential benefits and that will not hamper technological innovation.

III. ANALYSIS OF THE COMMON POSITION

The common position follows the main approach of the Commission proposal. Like the Commission proposal, the common position aims at striking a balance between the need to make provision for the financial integrity of electronic money institutions and the protection of consumers as well as the need to ensure that the development of electronic money schemes is not hampered by excessive regulation. The balance in the common position is achieved by introducing a more restrictive legal framework than that proposed by the Commission on certain issues while introducing a more flexible framework on other points.

The changes in the common position as compared to each Article of the Commission proposal are set out below. Amendment 1 proposed by the European Parliament, replacing the term "user" by "bearer" in the entire text, is included in the common position.

Article 1 (Article 1 of the Commission proposal)

Paragraph 3(a) includes Amendment 14 proposed by the European Parliament. It further makes it clear that the Directive applies only to issuers of electronic money.

Paragraph 3(b) aims at making the legal nature of the definition of electronic money more precise by adding that electronic money constitutes a claim on the issuer. The examples of the forms that electronic money may take have been deleted from the first indent as unnecessary in the enacting terms of the Directive and have been included in recital 3. A new paragraph (ii) has been added stipulating that the bearer must always pay in full for the electronic money received. It will thus not be possible to issue electronic money for a higher amount than that paid in exchange. Point (iii) ((ii) in the Commission proposal) has been kept as proposed by the Commission, except that the term "issuer" has been chosen to cover "the issuer" and "the issuing institution". Points (iii) and (iv) in the Commission proposal have been deleted as superfluous in the enacting terms of the Directive; the explanation that electronic money is intended to serve as a surrogate for coins and banknotes and is generated for the purpose of effecting electronic transfers of limited amounts is set out in recital 3.

Amendment 15, amending Article 1(3)(b), proposed by the European Parliament contains several features which are to some extent included in the common position but drafted differently. The amendment to (b)(ii) concerning subsidiaries, proposed by the European Parliament has been included in Article 8 relating to the waiver, see below. The proposed (b) (iiia) is not included in the common position since the Council did not find it appropriate to include provisions relating to charges in the definition of electronic money. The terms "competent authorities" (ba) and "own funds" (bb) are defined in the Second Banking Directive, Directive 89/646/EEC, which applies to electronic money institutions and therefore the common position does not include these amendments, although Article 5(1) of the common position does refer to the Own Funds Directive, Directive 89/299/EEC, see below.

In order to align the text with that of the Second Banking Directive (89/646/EEC) a new provision has been introduced in paragraph 4 stipulating that only credit institutions as defined in the first indent of Article 1 of the First Banking Directive (77/780/EEC), in other words electronic money institutions and credit institutions in the traditional sense, may issue electronic money.

Paragraph 5 essentially follows the Commission proposal (paragraph 4 of the Commission proposal). The reference in (a) to point 5 of the Annex to the Second Banking Directive has been deleted in order to avoid confusion. Instead it is clearly stated that electronic money institutions must not grant any form of credit, in order to avoid electronic money being issued on credit without any actual exchange of funds. This prohibition does not mean that an electronic money institution cannot invest in debt instruments. The investment provisions in Article 5 are not affected. Point (b) has been redrafted to make the intention behind this provision clearer.

Article 2 (Article 2 of the Commission proposal)

Paragraph 1 includes Amendment 16 proposed by the European Parliament and paragraph 3 of the Commission proposal has in consequence been deleted, as proposed by the European Parliament in Amendment 17.

In the second sentence of paragraph 2 the explicit reference to specific articles in the Second Banking Directive has been replaced by a reference to the mutual recognition arrangements provided for in that Directive, since the freedom of establishment and the freedom to provide services are rights based on the Treaty.

As in the Commission proposal, paragraph 3 makes it clear that funds received in exchange for electronic money are not deposits in the sense of Article 3 of the Second Banking Directive. The drafting has been amended to take into account the introduction of provisions on redeemability. The reference in (a) of the Commission proposal to a surrogate for coins and banknotes is now set out in recital 3 and the content of (b) of the Commission proposal is covered by the prohibition against the granting of credit in Article 1(5) of the common position. The amendment to Article 2(4) proposed by the European Parliament, Amendment 18, is included in Article 3 of the common position, see below.

Article 3 (new)

Since the substance of Amendments 18 and 19 overlaps, the Council has chosen to merge the two amendments and include them in the new Article 3 in order to set out all provisions relating to redeemability in one article. The wording corresponds closely to that of Amendment 19 with two exceptions:

- the cost element of Amendment 18 has been included in the new Article 3, and

- in order to allow a certain flexibility regarding the manner in which electronic money is redeemed in practice, the issuer may also redeem the money by a transfer to an account.

Article 4 (Article 3 of the Commission proposal)

The common position sets out all amounts in EUR, not in ECU and thus includes Amendment 20 proposed by the European Parliament. In referring to the Own Funds Directive, the common position includes a part of Amendment 15 proposed by the European Parliament.

The minimum initial capital is set at EUR 1 million in (1). This amount represents a balance between the need to ensure that electronic money institutions have sufficient own funds to ensure their financial stability and the need to foster the development of electronic money schemes by avoiding excessive requirements for the setting up of new schemes.

The rest of Article 4 is unchanged compared to Article 3 of the Commission proposal.

Article 5 (Article 4 of the Commission proposal)

Article 5 includes Amendments 21 and 22 proposed by the European Parliament.

The Article further contains some technical drafting changes aimed at making the text clearer: point (b) has been divided into two subpoints and references to the Solvency Ratio Directive, Directive 89/647/EEC, and to the Second Banking Directive, Directive 89/646/EEC, have been introduced in order to make the text more precise. Furthermore, the text has been redrafted to take account of the wording of Article 1(5) which limits the holdings of electronic money institutions in other undertakings.

Article 6 (Article 5 of the Commission proposal)

Article 6 has been redrafted in line with Article 3(7) of the Solvency Ratio Directive, to allow the competent authorities greater flexibility when verifying compliance with Articles 4 and 5.

Article 7 (Article 6 of the Commission proposal)

The common position has retained only the first paragraph of the Commission proposal. The Council considers that Article 7, as drafted in the common position, is sufficient to allow supervision of all such institutions. This includes institutions which have delegated certain functions to other undertakings since explicit reference is made to the financial and non-financial risks to which the electronic money institution is exposed, including technical and procedural risks. Paragraphs (2) and (3) of the Commission proposal have, consequently, been deleted.

Article 8 (Article 7 of the Commission proposal)

The common position retains the waiver proposed by the Commission but with changes to its scope and form, to allow Member States a larger degree of flexibility in the implementation of the Directives.

Member States have the option, set out in paragraph 1, of waiving the application of some or all of the provisions of this Directive and the application of the First and Second Banking Directives. This will allow Member States that wish to avail themselves of this option, full flexibility to take account of the specific nature of each scheme, which is of particular importance in view of the scope of Article 8, see below. This option does not affect the nature of the institutions concerned. They remain "credit institutions" as defined in the first indent of Article 1 of the First Banking Directive, and the competence of the monetary authorities to impose minimum reserve requirements is not affected.

The common position sets out three categories of institutions to which the waiver can be applied:

1. As in the Commission proposal, small institutions may benefit from the waiver. However, the common position limits this possibility more narrowly than in the Commission proposal, restricting it to institutions whose total financial liabilities relating to outstanding electronic money do not normally exceed EUR 5 million and never exceed EUR 6 million, (1)(a).

2. An institution that forms part of a group may benefit from the waiver, only if other members of the same group accept the electronic money issued by it, (1)(b). The common position thus takes account of Amendment 15 proposed by the European Parliament. It also strikes a balance between the Commission proposal, where institutions issuing electronic money for use within the same group are in all cases fully included in the scope of the Directive, and the European Parliament proposal where such institutions are excluded.

3. Institutions that issue electronic money with a limited purpose may also benefit, (1)(c). The common position defines this as electronic money which is accepted as payment by only a limited number of undertakings in the same local premises or in a limited local area (e.g. a university campus) or undertakings which have close financial or business relations with the issuing institution (e.g. a retail chain with independent members but with a common marketing or distribution scheme).

As in the Commission proposal, certain restrictions are imposed upon institutions which benefit from the waiver: a maximum storage amount set at EUR 150 per card and the stipulation that these institutions shall not benefit from the mutual recognition arrangements provided in the Second Banking Directive, Directive 89/646/EEC. In addition the common position in (3) requires that the institutions shall report periodically on their activities.

The common position has not retained paragraph 2 of the Commission proposal and thus includes Amendment 23 proposed by the European Parliament.

Article 9 (Article 8 of the Commission proposal)

In comparison with the Commission proposal, the common position introduces more specific deadlines concerning the grandfathering clause. It also stipulates that if an institution does not comply with the Directive within a limited period, it cannot benefit from mutual recognition arrangements.

Article 10

The common position sets the date for implementation 18 months after the entry into force of the Directive. The Directive enters into force on the day of its publication.

Article 11

In view of the rapid development within the sector, the common position stipulates that the Commission shall present a report on the application of the Directive not later than three years after its implementation. The report shall in particular cover a number of issues that have been identified as being of special concern.

Recitals

The recitals have been adapted following the changes made to the Commission proposal.

The common position includes Amendments 2 and 10 proposed by the European Parliament.

Amendments 3, 4, 5, 6, 7, 8, 9, 11, 12 and 13 proposed by the European Parliament, relating for the most part to the question of interoperability, have not been included in the common position since they do not serve to explain the enacting terms of the Directive (see point 10 of the interinstitutional Agreement on common guidelines for the quality of drafting of Community legislation(1)). The Council further considers that Amendments 3, 8, 12 and 13 are not compatible with the Commission's right of initiative, either according to the Treaty in the case of Amendments 3, 12 and 13, or according to derived Community law in the case of Amendment 8.

IV. CONCLUSION

The Council considers that all the amendments made to the Commission proposal are fully in line with the objectives of the proposed Directive. The aim has been to ensure the financial integrity of electronic money institutions without stifling developments in the field of electronic money and thus to help to cultivate an environment which fosters the development of this new means of payment. The common position includes the substance of the amendments to the enacting terms of the Directive proposed by the European Parliament and the related changes to the recitals.

(1) OJ C 73, 17.3.1999, p. 1.