Proposal for a European Parliament and Council Directive on the taking up, the pursuit and the prudential supervision of the business of electronic money institutions
Date: 1998-09-21
Institutions: European Commission
Subjects: approximation of laws, banking, electronic money, financial institution, freedom to provide services

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C  317/7

II

(Preparatory  Acts)

COMMISSION

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

(98/C  317/06)

COM(1998)  461  final  -  98/0252(COD)

(Submitted  by  the  Commission  on  21  September  1998)

THE  EUROPEAN  PARLIAMENT  AND  THE  COUNCIL
OF  THE  EUROPEAN  UNION,

throughout 

recognised 
the
application  of  the  principle  of  home  Member  State
prudential  supervision;

the  Community 

and 

Having  regard  to  the  Treaty  establishing  the  European
Community,  and 
third
in  particular 
sentences  of  Article  57(2)  thereof,

first  and 

the 

Having  regard  to  the  proposal  from  the  Commission,

Having  regard  to  the  opinion  of  the  Economic  and
Social  Committee,

Acting  in  accordance  with  the  procedure  referred  to  in
Article  189b  of  the  Treaty,

Whereas  credit  institutions  within  the  meaning  of  Article
1(1)(b)  of  Council  Directive  77/780/EEC(cid:216)(˛),  as 
last
amended  by  European  Parliament  and  Council  Directive
98/.(cid:216).(cid:216)./EC  are  limited  in  the  scope  of  their  activities;

Whereas,  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  admin(cid:220)
istrative  provisions  relating  to  the  taking  up,  the  pursuit
and  the  prudential  supervision  of  the  business  of  elec(cid:220)
tronic  money  institutions;

Whereas  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,
license
making  possible 

the  granting  of  a 

single 

framework 

technological 

that  assists  electronic  money 

Whereas  within  the  wider  context  of  rapidly  evolving
electronic  commerce  it  is  desirable  to  provide  a  regu(cid:220)
latory 
in
its  full  potential  benefits  and  that  avoids
delivering 
particular;
hampering 
innovation 
whereas,  therefore,  this  Directive 
introduces  a  tech(cid:220)
the
nology(cid:220)neutral 
prudential  supervision  of  electronic  money  institutions  to
their  sound  and
the  extent  necessary 
prudent  operation  and 
in
integrity 
particular;

for  ensuring 
their 

legal  framework 

that  harmonises 

financial 

in 

Whereas  credit  institutions,  by  virtue  of  point  5  of  the
last
Annex  to  Council  Directive  89/646/EEC(cid:216)(ˇ)  as 
amended  by  Directive  92/30/EEC(cid:216)(—),  are  already
issue  and  administer  means  of  payment
allowed  to 
including  electronic  money  and 
to  carry  on  such
activities  Community(cid:220)wide  subject  to  mutual  recognition
and  to  the  comprehensive  prudential  supervisory  system
applying  to  them 
in  accordance  with  the  European
banking  Directives;

Whereas  the  introduction  of  a  separate  prudential  super(cid:220)
visory  regime  for  electronic  money  institutions,  which
although  calibrated  on  the  prudential  supervisory  regime
and  Directives
applying 
77/780/EEC  and  89/646/EEC 
in  particular,  differs
from  that  regime,  is  justified  and  desirable  because  the
issuance  of  electronic  money  cannot, 
its
surrogate
specific 

in  view  of 

institutions 

electronic 

character 

credit 

an 

to 

as 

(˛)(cid:217)OJ  L  322,  17.12.1977,  p.  30.

(ˇ)(cid:217)OJ  L  386,  30.12.1989,  p.  1.
(—)(cid:217)OJ  L  110,  28.4.1992,  p.  52.

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for  coins  and  banknotes,  be  regarded  as  a  deposit(cid:220)taking
activity  prohibited  pursuant  to  Article  3  of  Directive
89/646/EEC  to  undertakings  other  than  credit  insti(cid:220)
tutions;

Whereas  the  Banking  Advisory  Committee  has  been
consulted  on  the  adoption  of  this  Directive,

Whereas 
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,  is  less  cumbersome  than  the  prudential
supervisory 
institutions,
notably  as  regards  reduced  initial  capital  requirements
and  the  non(cid:220)application  of  Directives  89/647/EEC(cid:216)(˛),
92/121/EEC(cid:216)(ˇ)  and  93/6/EEC(cid:216)(—);

regime  applying 

to  credit 

Whereas,  however,  it  is  necessary  to  preserve  a  level
playing  field  between  credit  institutions  issuing  electronic
money  and  electronic  money  institutions  and,  thus,  to
ensure  fair  competition  among  a  wider  range  of  insti(cid:220)
tutions  to  the  benefit  of  users;  whereas  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  credit  institutions,
notably  as  regards  restrictions  of  the  business  activities
institutions  may  carry  on  and,
electronic  money 
particularly,  prudent 
investments
aimed  at  ensuring  that  their  financial  liabilities  related  to
outstanding  electronic  money  are  backed  at  all  times  by
highly  liquid  low  risk  assets;

limitations  of 

their 

Whereas  with  a  view  to  the  possibility  of  operational  and
other  ancillary  functions  related  to  the  issuance  of  elec(cid:220)
tronic  money  being  performed  by  undertakings  which
are  not  subject  to  prudential  supervision  it  is  appropriate
to  afford  competent  authorities  certain  powers  with
respect  to  these  undertakings;

Whereas  it  is  appropriate  to  afford  competent  authorities
the  possibility  to  waive  certain  requirements  imposed  by
this  Directive  for  electronic  money  institutions  which
operate  only  within  the  territories  of  the  respective
Member  State  and  whose  business  activities  do  not
exceed  certain  thresholds;

HAVE  ADOPTED  THIS  DIRECTIVE:

Article  1

Scope,  definitions  and  restriction  of  activities

1.(cid:218)(cid:217)This  Directive  shall  apply  to  electronic  money  insti(cid:220)
tutions.

2.(cid:218)(cid:217)It  shall  not  apply  to  the  institutions  referred  to  in
Article  2(2)  of  Directive  77/780/EEC.

3.(cid:218)(cid:217)For  the  purposes  of  this  Directive:

(a)(cid:217)"electronic  money  institution’  shall  mean  an  under(cid:220)
taking,  other  than  a  credit  institution  as  defined  in
Article  1(1)(a)  of  Council  Directive  77/780/EEC
which  issues  means  of  payment  in  the  form,  of  elec(cid:220)
tronic  money  or  which  invests  the  proceeds  from
such  activities  without  being  subject  to  Council
Directive  93/22/EEC(cid:216)((cid:209));

(b) "electronic  money’  shall  mean  monetary  value  which

is

(i) stored  electronically  on  an  electronic  device
such  as  a  chip  card  or  a  computer  memory;

(ii) accepted  as  means  of  payment  by  undertakings

other  than  the  issuing  institution;

(iii)(cid:217)generated  in  order  to  be  put  at  the  disposal  of
users  to  serve  as  an  electronic  surrogate  for
coins  and  banknotes;  and

(iv) generated  for  the  purpose  of  effecting  electronic

transfers  of  limited  value  payments.

4.(cid:218)(cid:217)The  business  activities  of  electronic  money  insti(cid:220)
tutions  other  than  the  issuing  of  electronic  money  shall
be  restricted  to:

Whereas  adoption  of  this  Directive  constitutes  the  most
appropriate  means  of  attaining  the  desired  objectives;
whereas 
the  minimum
is 
necessary  to  attain  these  objectives  and  does  not  go
beyond  what  is  needed  for  this  purpose;

this  Directive 

limited 

to 

(a)(cid:217)the  provision  of  closely 

related 

financial  and
non(cid:220)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  within  the  meaning  of  point  5  of  the  Annex
to  Directive  89/646/EEC;  and

(˛)(cid:217)OJ  L  386,  30.12.1989,  p.  14.
(ˇ)(cid:217)OJ  L  29,  5.2.1993,  p.  1.
(—)(cid:217)OJ  L  141,  11.6.1993,  p.  1.

((cid:209))(cid:217)OJ  L  141,  11.6.1993,  p.  27.

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(b) the  provision  of  non(cid:220)financial  services 
delivered  through  the  electronic  device.

that  are

and  the  user  shall  define  if  the  stored  electronic  money  is
redeemable  or  not,  and,  if  appropriate,  the  conditions,
the  formalities  and  the  time  period  of  redeemability.

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  insti(cid:220)
tution  concerned.

Article  2

Application  of  banking  Directives

Article  3

Initial  capital  and  ongoing  own  funds  requirements

1.(cid:218)(cid:217)Electronic  money  institutions  shall  have  an  initial
capital  of  no  less  than  ECU  500(cid:216)000.  Notwithstanding
paragraphs  2  and  3  their  own  funds  shall  not  fall  below
that  amount.

1.(cid:218)(cid:217)Save  where  otherwise  expressly  provided 
for,
references  to  credit  institutions  in  Community  Regu(cid:220)
lations,  Directives  other  than  Directives  77/780/EEC
and  89/646/EEC,  recommendations  and  opinions  shall
not  apply  to  electronic  money  institutions.

2.(cid:218)(cid:217)Electronic  money  institutions  shall  have  at  all  times
own  funds  equal  to  or  above  2(cid:216)%  of  the  higher  of  the
current  amount  or  the  average  of  the  preceding  six(cid:220)
months  total  amount  of  their  financial  liabilities  related
to  outstanding  electronic  money.

2.(cid:218)(cid:217)Article  2(5)  and  (6),  Article  3(3)(b),  (c)  and  (d)  and
(7),  Article  4,  Article  6,  Article  7(2)  and  (3),  Article  8(2),
(3)  and  (4),  Article  10  and  Article  14  of  Directive
77/780/EEC  and  Article  4,  Article  6,  Article  10,  Article
12,  Article  18(2),  Article  23  and  Article  24  of  Directive
89/646/EEC  shall  not  apply.  The  freedom  of  estab(cid:220)
lishment  and  the  freedom  to  provide  services  according
to  Articles  18  to  21  of  Directive  89/646/EEC  shall  not
apply  to  electronic  money  institutions’  business  activities
other  than  the  issuance  of  electronic  money.

the  higher  of 

the  current  amount  or 

institution  has  not
3.(cid:218)(cid:217)Where  an  electronic  money 
completed  a  six(cid:220)month  period  of  business,  including  the
day  it  starts  up,  it  shall  have  own  funds  equal  to  or  above
2(cid:216)%  of 
the
six(cid:220)months  target  total  amount  of  its  financial  liabilities
related  to  outstanding  electronic  money.  The  six(cid:220)months
target  total  amount  of  the  institution’s  financial  liabilities
related 
shall  be
to  outstanding  electronic  money 
evidenced  by  its  business  plan  subject  to  any  adjustment
to  that  plan  having  been  required  by  the  competent  auth(cid:220)
orities.

3.(cid:218)(cid:217)Council 
and
92/30/EEC  (cid:216)(ˇ)  shall  apply  to  electronic  money  insti(cid:220)
tutions.

91/308/EEC(cid:216)(˛) 

Directives 

Article  4

Limitations  of  investments

4.(cid:218)(cid:217)For  the  purpose  of  applying  Article  3  of  Directive
89/646/EEC  funds  received  in  exchange  for  electronic
money  shall  not  be  regarded  as  deposits  within  the
meaning  of  that  Article  if  the  underlying  contractual
arrangements:

1.(cid:218)(cid:217)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)(cid:217)clearly  establish  the  specific  character  of  electronic
money  as  an  electronic  surrogate  for  coins  and
banknotes;  and

(a)(cid:217)asset  items  which  according  to  Article  6(1)(a)  points
1,  2,  3,  4  and  Article  7(1)  of  Directive  89/647/EEC
attract  a  zero  credit  risk  weighting  and  which  are
highly  liquid;

(b) do  not  provide  for  the  possibility  of  advancing  funds
with  a  view  to  and  in  exchange  for  the  receipt  of
electronic  money  at  a  later  stage.

(b) sight  deposits  held  with  Zone  A  credit  institutions

and  debt  instruments,  which  are

Redeemability  of  electronic  money  is,  in  itself,  not  a
sufficient  reason  for  considering  the  funds  advanced  by
the  user  to  be  deposits  within  the  meaning  of  Article  3  of
Directive  89/646/EEC.  The  contract  between  the  issuer

(˛)(cid:217)OJ  L  166,  28.6.1991,  p.  77.
(ˇ)(cid:217)OJ  L  110,  28.4.1992,  p.  52.

(i) highly  liquid;

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

(iii)(cid:217)recognised  by  competent  authorities  as  qual(cid:220)
ifying  items  within  the  meaning  of  Article  2(12)
of  Directive  93/6/EEC;  and

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(iv) issued  by  undertakings  other  than  undertakings
which  have  a  direct  or  indirect  holding  in  the
electronic  money  institution  concerned  or  which
must  be 
these  undertakings’
in 
consolidated  accounts  or  in  which  the  electronic
money 
institution  concerned  has  a  direct  or
indirect  holding.

included 

2.(cid:218)(cid:217)Investments  referred  to  in  paragraph  1(b)  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.(cid:218)(cid:217)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  highly 
interest(cid:220)rate  and
foreign(cid:220)exchange(cid:220)related  off  balance(cid:220)sheet  items  in  the
form  of  exchange(cid:220)traded  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.

liquid 

4.(cid:218)(cid:217)Member  States  shall  impose  appropriate  limitations
on  the  market  risks  electronic  money  institutions  may
incur  from  the  investments  referred  to  in  paragraph  1.

5.(cid:218)(cid:217)For  the  purpose  of  applying  paragraph  1  assets  shall
be  valued  at  the  lower  of  cost  or  market  value.

6.(cid:218)(cid:217)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 
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(cid:216)%  of  these  liabilities  and  the
institution’s  total  amount  of  own  funds.

institution 

Article  5

Verification  by  competent  authorities

shall  verify  compliance  with
Competent  authorities 
Articles  3  and  4  not  less  than  twice  each  year  on  the
basis  of  data  supplied  by  the  electronic  money  insti(cid:220)
tutions.

Article  6

Sound  and  prudent  operation

institutions  shall  have  sound
1.(cid:218)(cid:217)Electronic  money 
and  prudent  management,  sound  administrative  and
accounting  procedures  and  adequate 
internal  control
mechanisms.  These  should  respond  to  the  financial  and
non(cid:220)financial  risks  to  which  the  institution  is  exposed.

to 

these 
supervision, 

institution  undertakes
2.(cid:218)(cid:217)If  an  electronic  money 
business  activities  of  the  type  referred  to 
in  Article
1(3)(a)  in  cooperation  with  another  undertaking  which
performs  operational  or  other  ancillary  functions  related
to  these  business  activities  and  which,  with  a  view  to  the
functions, 
risks  related 
to  no
prudential 
the  contractual  arrangements
underlying  this  cooperation  shall  provide  for  contractual
rights  which  enable  the  electronic  money 
institution
these  risks  and
to  monitor  and  contain 
properly 
immediately 
the
cancel 
to 
unconditionally 
contractual  arrangements  underlying  the  cooperation  if
the  effective  exercise  of  these  rights 
in
practice  or  upon  request  of  the  competent  authorities  in
accordance  with  paragraph  3,  last  indent.

impaired 

subject 

and 

is 

is 

3.(cid:218)(cid:217)In  order  to  ensure  the  effective  supervision  of  an
institution  which  cooperates  with
electronic  money 
another  undertaking 
in
paragraph  2,  Member  States  shall  provide  that  their
competent  authorities  may:

the  manner  described 

in 

(a)(cid:217)require 

that  other  undertaking 

supply  any
information  which  would  be  relevant  for  the  purpose
of  supervising  the  electronic  money  institution;

to 

(b) carry  out,  or  have  carried  out  by  external  inspectors,
on(cid:220)the(cid:220)spot  inspections  of  that  other  undertaking  to
verify  such  information;  and

(c) require  as  appropriate  the  electronic  money  insti(cid:220)
tution  promptly  to  remedy  any  shortcomings  and  if
the  contractual
necessary 
arrangements  underlying  the  cooperation  with  that
other  undertaking.

immediately 

to  cancel 

Article  7

Waiver

1.(cid:218)(cid:217)Member  States  may  waive  the  application  of  Article
1(4),  Article  3(1)  and  Article  8  of  this  Directive  and  the
application  of  Directives  77/780/EEC  and  89/646/EEC
to  an  electronic  money  institution  if  the  totality  of  the
in  Article
business  activities  of  the  type  referred  to 
1(3)(a)  it  undertakes  alone  or  in  cooperation  with  other
electronic  money 
following
conditions:

institutions 

fulfil 

the 

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(a)(cid:217)it  generates  a  total  amount  of  financial  liabilities
related 
that
normally  does  not  exceed  ECU  10  million  and  never
exceeds  ECU  12  million;  and

electronic  money 

to  outstanding 

(b) is 

related 

to  electronic  money 

the  underlying
contractual  arrangements  of  which  provide  that  the
electronic  storage  device  at  the  disposal  of  users  for
the  purpose  of  making  payments  is  subject  to  a
maximum  storage  amount  of  no  more  than  ECU
150.

An  electronic  money  institution  for  which  the  application
of  one  of  the  above  Articles  has  been  waived  shall  not
benefit  from  the  freedom  of  establishment  and  the
freedom  to  provide  services  as  conveyed  by  Directive
89/647/EEC.

2.(cid:218)(cid:217)For  the  purpose  of  applying  this  Directive  to  under(cid:220)
takings  which  seek  for  a  waiver  according  to  para(cid:220)
graph  1  to  be  approved  or  for  which  the  waiver  has
been  approved:

(a)(cid:217)"competent  authorities’  shall  mean  those  national
authorities  which  are  responsible  for  the  supervision
of  electronic  money  institutions;  and

(b) "own  funds’  shall  mean  own  funds  as  defined  in

Council  Directive  89/299/EEC(cid:216)(˛).

Article  8

Grandfathering

subject 
their  activity 

this
institutions 
1.(cid:218)(cid:217)Electronic  money 
Directive  which  have  commenced 
in
accordance  with  the  provisions  in  force  in  the  Member
States  in  which  they  have  their  head  offices  before  the
entry  into  force  of  the  provisions  adopted  in  implemen(cid:220)
tation  of  this  Directive  shall  be  presumed  to  be  auth(cid:220)
orised.  The  Member  States  shall  oblige  such  electronic

to 

money  institutions  to  submit,  within  a  reasonable  period,
all  relevant  information  in  order  to  allow  the  competent
authorities  to  assess  whether  the  institutions  comply  with
this  Directive,  which
the  requirements  pursuant 
to  ensure
in  order 
measures  need 
compliance,  or  whether  a  withdrawal  of  authorisation  is
appropriate.

to 
taken 

to  be 

2.(cid:218)(cid:217)The  presumption  according  to  paragraph  1,  first
sentence  shall  not  apply  to  electronic  money  institutions
which  benefit  from  a  waiver  in  accordance  with  Article
7.  If  such  a  waiver  is  subject  to  prior  approval  by
competent  authorities,  the  presumption  shall  become
void  by  the  time  of  that  approval.

Article  9

laws,
1.(cid:218)(cid:217)Member  States  shall  bring 
regulations  and  administrative  provisions  necessary  to
comply  with  this  Directive  by  31  December  1999  at  the
latest.  They  shall  immediately  inform  the  Commission
thereof.

into  force  the 

When  Member  States  adopt  these  measures,  these  shall
contain  a  reference  to  this  Directive  or  shall  be  accom(cid:220)
panied  by  such  reference  at  the  time  of  their  official
publication.  The  procedure  for  such  reference  shall  be
adopted  by  Member  States.

States 

2.(cid:218)(cid:217)Member 
the
shall 
Commission  the  text  of  the  main  provisions  of  national
law  which  they  adopt 
in  the  field  covered  by  this
Directive.

communicate 

to 

Article  10

This  Directive  shall  enter  into  force  on  the  20th  day
following  its  publication  in  the  Official  Journal  of  the
European  Communities.

Article  11

(˛)(cid:217)OJ  L  124,  5.5.1989,  p.  16.

This  Directive  is  addressed  to  the  Member  States.