The new regime was adopted after a draft version was favourably
received during a period of public consultation, launched in
December 2001.
David Strachan, Director of Deposit Takers, said:
"Because the feedback we received on the
proposed regime was generally positive, we have not made any major
changes to the framework on which we consulted. Our ongoing
dialogue with industry and consumers will make sure that, as the
industry and the market develop, our regulation remains
up-to-date."
There have been modifications to the draft regime in some areas,
including the amount of money that individual users can load in
their electronic purses.
The FSA said that it believes that the risks associated with the
use of e-money warrant a limit on purse size. Responding to points
raised by the industry it has increased the limit of £250 per purse
initially proposed to £1,000. A higher purse limit may be permitted
where certain safeguards are met. Another change allows businesses
to issue e-money at a discount for marketing purposes in certain
tightly controlled circumstances.
The Government has decided that the Financial Services
Compensation Scheme will not apply to e-money issuers.
Consequently, customers will have no access to compensation should
an e- money issuer become insolvent. E-money issuers will, however,
be included within the scope of the Financial Ombudsman Service and
must also have their own procedures for dealing with customer
complaints.
The key characteristics of the proposed framework for e-money
issuers relate to their financial soundness:
- Issuers must "ring fence" their e-money activities from other
areas of business risk.
- Funds held in exchange for the issue of e-money must be
invested in high quality liquid assets.
- There will be a minimum capital requirement for issuers - at
least 2% of outstanding e-money liabilities or €1 million,
whichever is the higher.
- E-money issuers must have sound and prudent systems and
adequate internal control mechanisms and must comply with the FSA's
money laundering requirements.
- The FSA will be empowered to grant waivers from regulation to
small or locally based firms, although these will still have to
submit periodic information about their businesses.
