Textual Amendments
F1Words in Pt. 3 heading omitted (31.12.2020) by virtue of The Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 (S.I. 2018/1201), reg. 1(3), Sch. 2 para. 6 (with reg. 4, Sch. 3 Pt. 1) (with further transitional provisions in Sch. 3 Pt. 1A as inserted by S.I. 2019/405, regs. 1, 10 and as amended by S.I. 2019/1010, regs. 1(3), 7; S.I. 2019/1212, regs. 1(2), 7 and S.I. 2020/56, regs. 1, 8); 2020 c. 1, Sch. 5 para. 1(1)
21.—(1) An electronic money institution must keep relevant funds segregated from any other funds that it holds.
(2) Where the institution continues to hold the relevant funds at the end of the business day following the day on which they were received it must—
(a)place them in a separate account that it holds with an authorised credit institution [F2or the Bank of England]; or
(b)invest the relevant funds in secure, liquid, low-risk assets (“relevant assets”) and place those assets in a separate account with an authorised custodian.
(3) An account in which relevant funds or relevant assets are placed under paragraph (2) must—
(a)be designated in such a way as to show that it is an account which is held for the purpose of safeguarding relevant funds or relevant assets in accordance with this regulation; and
(b)be used only for holding those funds or assets [F3, or for holding those funds or assets together with proceeds of an insurance policy or guarantee held in accordance with regulation 22(1)(b)].
(4) No person other than the electronic money institution may have any interest in or right over the relevant funds or the relevant assets placed in an account in accordance with paragraph (2)(a) or (b) except as provided by this regulation.
[F4(4A) Notwithstanding paragraphs (1), (2), (3)(b) and (4), where an electronic money institution is a participant in a designated system and the institution holds an account at the Bank of England for the purposes of completing the settlement of transfer orders that have been entered into the designated system on behalf of electronic money holders—
(a)funds held in the account pending settlement in accordance with the rules or default arrangements of the designated system, in respect of transfer orders that have been entered into the designated system on behalf of electronic money holders, may continue to be held in the account with relevant funds;
(b)the account, or a specified amount of funds in the account, may be subject to an interest or right in favour of the Bank of England in order to ensure the availability of funds to complete the settlement of transfer orders in accordance with the rules or default arrangements of the designated system;
(c)subject to paragraph (4B), funds received into the account by the electronic money institution upon settlement are to be considered as having been appropriately safeguarded in accordance with this regulation from the time of receipt in the designated system until the time of receipt into the account.
(4B) The Authority may direct that paragraph (4A)(c) does not apply in relation to a designated system if, in the Authority's view, the rules and default arrangements of that system do not adequately insulate the funds of electronic money holders from the claims of other creditors of electronic money institutions which are participants in the system.]
(5) The institution must keep a record of—
(a)any relevant funds segregated in accordance with paragraph (1);
(b)any relevant funds placed in an account in accordance with paragraph (2)(a); F5...
(c)any relevant assets placed in an account in accordance with paragraph (2)(b);
[F6(d)any funds held in an account as permitted by paragraph (4A)(a);
(e)any funds expected to be received into an account as described in paragraph (4A)(c) in respect of transfer orders that have been entered into the designated system; and
(f)any funds received into an account as described in paragraph (4A)(c).]
(6) For the purposes of this regulation—
(a)assets are both “secure” and “low risk” if they are—
[F7(i)asset items falling into one of the categories set out in Article 336(1) of the capital requirements regulation, for which the specific risk capital charge is no higher than 1.6% but excluding other qualifying items as defined in Article 336(4); or]
(ii)units in an undertaking for collective investment in transferable securities which invests solely in the assets mentioned in paragraph (i); and
(b)assets are “liquid” if they are approved as such by the Authority.
(7) In this regulation—
“authorised credit institution” means a person authorised for the purposes of the 2000 Act to accept deposits [F8or an approved foreign credit institution (see paragraph (8)), but does not include] a person in the same group as the electronic money institution;
“authorised custodian” means a person authorised for the purposes of the 2000 Act to safeguard and administer investments F9...
[F10“default arrangements”, “designated system”, “rules”, “settlement”, “system” and “transfer order” have the same meanings as in the Financial Markets and Insolvency (Settlement Finality) Regulations 1999.]
[F11(8) In paragraph (7), “approved foreign credit institution” means—
(a)the central bank of a State that is a member of the Organisation for Economic Co-operation and Development (“an OECD state”),
(b)a credit institution that is supervised by the central bank or other banking regulator of an OECD state,
(c)any credit institution that—
(i)is subject to regulation by the banking regulator of a State that is not an OECD state,
(ii)is required by the law of the country or territory in which it is established to provide audited accounts,
(iii)has minimum net assets of £5 million (or its equivalent in any other currency at the relevant time),
(iv)has a surplus of revenue over expenditure for the last two financial years, and
(v)has an annual report which is not materially qualified.]
Textual Amendments
F2Words in reg. 21(2)(a) inserted (13.8.2017 for specified purposes, 13.10.2017 for specified purposes, 13.1.2018 in so far as not already in force) by The Payment Services Regulations 2017 (S.I. 2017/752), reg. 1(2)(c)(iii)(3)(f)(i)(6), Sch. 8 para. 5(14)(a) (with reg. 3)
F3Words in reg. 21(3)(b) inserted (13.1.2018) by The Payment Systems and Services and Electronic Money (Miscellaneous Amendments) Regulations 2017 (S.I. 2017/1173), regs. 1(4), 5(a)
F4Reg. 21(4A)(4B) inserted (13.8.2017 for specified purposes, 13.10.2017 for specified purposes, 13.1.2018 in so far as not already in force) by The Payment Services Regulations 2017 (S.I. 2017/752), reg. 1(2)(c)(iii)(3)(f)(i)(6), Sch. 8 para. 5(14)(b) (with reg. 3)
F5Word in reg. 21(5) omitted (13.8.2017 for specified purposes, 13.10.2017 for specified purposes, 13.1.2018 in so far as not already in force) by virtue of The Payment Services Regulations 2017 (S.I. 2017/752), reg. 1(2)(c)(iii)(3)(f)(i)(6), Sch. 8 para. 5(14)(c)(i) (with reg. 3)
F6Reg. 21(5)(d)-(f) inserted (13.8.2017 for specified purposes, 13.10.2017 for specified purposes, 13.1.2018 in so far as not already in force) by The Payment Services Regulations 2017 (S.I. 2017/752), reg. 1(2)(c)(iii)(3)(f)(i)(6), Sch. 8 para. 5(14)(c)(ii) (with reg. 3)
F7Reg. 21(6)(a)(i) substituted (1.1.2014) by The Capital Requirements Regulations 2013 (S.I. 2013/3115), reg. 1(2), Sch. 2 para. 75(3)(a)
F8Words in reg. 21(7) substituted (31.12.2020) by The Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 (S.I. 2018/1201), reg. 1(3), Sch. 2 para. 7(2)(a) (with reg. 4, Sch. 3 Pt. 1) (with further transitional provisions in Sch. 3 Pt. 1A as inserted by S.I. 2019/405, regs. 1, 10 and as amended by S.I. 2019/1010, regs. 1(3), 7; S.I. 2019/1212, regs. 1(2), 7 and S.I. 2020/56, regs. 1, 8); 2020 c. 1, Sch. 5 para. 1(1)
F9Words in reg. 21(7) omitted (31.12.2020) by virtue of The Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 (S.I. 2018/1201), reg. 1(3), Sch. 2 para. 7(2)(b) (with reg. 4, Sch. 3 Pt. 1) (with further transitional provisions in Sch. 3 Pt. 1A as inserted by S.I. 2019/405, regs. 1, 10 and as amended by S.I. 2019/1010, regs. 1(3), 7; S.I. 2019/1212, regs. 1(2), 7 and S.I. 2020/56, regs. 1, 8); 2020 c. 1, Sch. 5 para. 1(1)
F10Words in reg. 21(7) inserted (13.8.2017 for specified purposes, 13.10.2017 for specified purposes, 13.1.2018 in so far as not already in force) by The Payment Services Regulations 2017 (S.I. 2017/752), reg. 1(2)(c)(iii)(3)(f)(i)(6), Sch. 8 para. 5(14)(d) (with reg. 3)
F11Reg. 21(8) inserted (31.12.2020) by The Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 (S.I. 2018/1201), reg. 1(3), Sch. 2 para. 7(3) (with reg. 4, Sch. 3 Pt. 1) (with further transitional provisions in Sch. 3 Pt. 1A as inserted by S.I. 2019/405, regs. 1, 10 and as amended by S.I. 2019/1010, regs. 1(3), 7; S.I. 2019/1212, regs. 1(2), 7 and S.I. 2020/56, regs. 1, 8); 2020 c. 1, Sch. 5 para. 1(1)