Payment Services Directive : Are You Ready?

Author:Mr David Williams and Sarah Lyons
Profession:LK Shields

The Payment Services Directive 2007/64/EC (the "PSD") will become effective in Ireland on 1 November 2009 and will introduce a new EU-wide licensing regime for many firms and business that have up until now operated in an unregulated environment.

To date the payment services market in the EU has been operated on a national level. The objective of the PSD is to remove this fragmented system and create an EU wide single market for payments, so encouraging competition and efficiency in payment systems. The PSD also provides the necessary legal platform for the Single Euro Payments Area and will reinforce the rights and protection of all the users of payment services. In summary, the PSD will :-

Introduce a list of firms entitled to provide 'payment services', including credit institutions, credit unions, electronic money institutions and post office giro institutions. These entities are not required to obtain further authorisation under the PSD but must comply with certain of its provisions. Create a new category of firm, a 'payment institution', that must obtain prior authorisation from the Financial Regulator before providing payment services. Payment institutions are firms which provide one or more payment services, such as facilitating deposits and withdrawals from bank accounts, executing direct debits and standing orders, money remittance and certain services provided through mobile phones or other digital and IT devices. Impose new prudential requirements and detailed conduct of business rules on all payment service providers (including payment institutions). Subject to the implementation of the European Communities (Payment Services) Regulations, the Financial Regulator will be the competent authority for the authorisation and supervision of payment institutions.

PAYMENT INSTITUTION AUTHORISATION As mentioned above, a new authorisation procedure for non-bank payment institutions has been created by the PSD.

The new regulatory regime for payment institutions is a lighter version of the regime currently applicable to banks and investment firms. Applicant firms must send a detailed application form to the Financial Regulator together with supporting documents including a Business Plan, Programme of Operations, questionnaires for key managers and details of qualifying shareholders. Financial stability needs to be demonstrated and firms will be subject to initial and ongoing capital requirements. Payment institutions will be...

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