IMPLEMENTING THE E-MONEY DIRECTIVE: A TRANSPOSITION NOTE

Directive
Directive 2000/46/EC of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (ELMIs)
Article	Objectives	Implementation	Responsibility

1	Scope, definitions and restriction of activities	Issuing e-money is made a regulated activity under the Financial Services & Markets Act 2000 (FSMA) and will therefore be regulated by the Financial Services Authority (FSA)	The Treasury - through amending the Regulated Activities Order (RAO) under s22 of FSMA.
	(3) Definition of e-money	E-money is defined by reference to the criteria laid down in the Directive; the only exception being that e-money issued at a discount is brought within the definition (article 2 of the amending Order). The FSA will then be able to make a rule prohibiting the issuance of e-money at discount.	FSA - through rules made under article 9H of the RAO (inserted by article 4 of the amending Order).
	(4) Prohibition of issuing e-money by non-credit institutions	Section 19 of FSMA provides that no firm may carry on a regulated activity in the UK unless it is authorised or exempt. By making e-money issuance a regulated activity, all firms not authorised or granted a waiver by the FSA will be prohibited from issuing e-money.	FSA - through rules made under s. 138 of FSMA
	(5) Restriction on business activities of non-bank e-money issuers	The FSA will make rules limiting the business activities of ELMIs, other than the issuing of e-money, to those permitted by Article 1(5) (a) and (b).
2	Application of Banking Directives	The provisions of FSMA, and of rules made by the FSA under it, which give effect to the Banking Directives, will apply to ELMIs where relevant.	The Treasury - through amending the RAO and paragraph 1(2) of Schedule 6 to FSMA. FSA - through rules made under s138 of FSMA.
2	(3) Difference between deposit taking and e-money issuance	The provision that funds do not constitute a deposit if they are exchanged immediately for e-money is reflected in the new article 9A of the RAO inserted by article 3 of the amending Order. This makes clear that the activities of accepting deposits and issuing e-money are mutually exclusive. E-money issuers are already covered by the Money Laundering Regulations 1993 (which implement the Money Laundering Directive), as a result of regulation 4(1)(h).
3	Requirement for redeemability of e-money	The FSA will make a rule stipulating that e-money must be redeemable (except where a particular issuer has been granted a waiver).	FSA - through rules made under s138 of FSMA.
4	Initial capital and ongoing own funds requirements	The FSA will make rules stipulating the necessary requirements for e-money issuers.	FSA - through rules made under s138 of FSMA.
5	Limitations on investments	The FSA will make rules stipulating the necessary requirements for e-money issuers.	FSA - through rules made under s138 of FSMA.
6	Verification of specific requirements by the FSA	The FSA will make rules stipulating the necessary requirements for e-money issuers.	FSA - through rules made under s138 of FSMA.
7	Sound and prudent operation of e-money institutions	The suitability of authorised firms (which will include ELMIs) is already a requirement under paragraphs 4 and 5 of Schedule 6 to FSMA.	The Treasury - through amending the RAO under s22 of FSMA to include issuing e-money as regulated activity.
8	(1) Criteria for allowing the FSA to waive the application of certain provisions of the Directive for ELMIs of a limited size	The FSA is given the power to grant and revoke waivers on a case-by-case basis (articles 9C - 9G of the RAO, inserted by article 4 of the amending Order). The criteria for granting waivers are the same as those in the Directive (i.e. a maximum storage amount of ?150 plus either criterion (a), (b) or (c) of Article 8(1)) - except that there is an absolute limit of ?10 million on the level of outstanding liabilities of issuers meeting either criterion (b) or (c).	The Treasury - through amending the RAO under s22 of FSMA.
	(2) Mutual recognition arrangements not available for waived firms	Schedule 3 to FSMA provides for mutual recognition under the single market directives - or "passporting"- of authorised firms. However, this will not apply to waived e-money issuers on the basis that they are not authorised.	The Treasury - through amending the RAO under s22 of FSMA.
	(3) Regular reporting to the FSA by waived firms	Waived firms will be required to report regularly to the FSA on their e-money activities. Article 9G of the RAO, as inserted by the amending Order, also empowers the FSA to collect information about such firms so as to determine whether the waiver conditions are still met.	FSA - through rules made under article 9G(1) of the amending Order.
9	Grandfathering	Article 9H of the RAO, as inserted by the amending order, makes the relevant transitional provisions, by granting existing UK and EEA issuers a time-limited exclusion, until 27 October 2002 (six months after the implementation date of 27 April). These six months will give such issuers the opportunity to take the measures necessary to gain authorisation or a waiver. Existing e-money issuers will be able to apply for permission during this six month period if they so desire.	The Treasury - through amending the RAO under s22 of FSMA.

Directive 2
Directive 2000/28/EC of 18 September 2000 amending Directive 77/780/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions
Article	Objectives	Implementation	Responsibility

1	Amending Directive 2000/12/EC	The necessary changes will fall to be implemented by FSA rules, or the required consequences will flow automatically as a result of firms being authorised under FSMA to issue e-money.	FSA - through rules made under s138 of FSMA

Implementation of the Electronic Money Directive index