Directive 2000/46/EC

Directive 2000/46/EC of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions

Published under Risk Management
Title: Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions
Source reference: http://europa.eu.int/eur-lex/pri/en/oj/dat/
Topic: Supervision and stability of electronic money institutions
Direct / indirect relevance Indirect. A large part of the text focuses on financial RM/RA practices, which implies an obligation to implement appropriate RM/RA measures with regard to network/information security.
Scope: Directly applicable to all EU Member States
Legal force: EU Directive, requires transposition into national law
Affected sectors: Providers of electronic money solutions (i.e. monetary value used as a substitute for currency which is stored on an electronic carrier such as a chip card or computer memory)
Relevant provision(s): Article 4 - Initial capital and ongoing own funds requirements

1. Electronic money institutions shall have an initial capital, as defined in Article 34(2), subparagraphs (1) and (2) of Directive 2000/12/EC, of not less than EUR 1 million. Notwithstanding paragraphs 2 and 3, their own funds, as defined in Directive 2000/12/EC, 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:

[...]

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.
Relevance to RM/RA: The provisions of the Directive imply certain basic RM/RA obligations for service providers in the electronic money market, including:

• Initial capital and investment limitation requirements, aiming to ensure their financial stability; • Related to this, an obligation to maintain sufficient documentation to be able to demonstrate compliance with these obligations to the competent national authorities upon audit;

• A high level corporate governance requirement to implement ‘sound and prudent management, administrative and accounting procedures and adequate internal control mechanisms’ to cover general operational risks. However, the Directive offers little guidance on how this requirement should be met.

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