On 16 September 2009, the European Council and of the Council of Ministers adopted Directive 2009/110/EC (the "new E-Money Directive"). The new E-Money Directive repeals Directive 2000/46/EC (the "existing E-Money Directive"), which introduced a prudential regulatory regime for providers that issue e-money, known as electronic money institutions ("ELMIs"), with effect from 30 April 2011.
The adoption of the new E-Money Directive follows the European Commission's review of the existing E-Money Directive and the market that it was intended to facilitate. The Commission concluded that e-money has yet to deliver the benefits that were anticipated1.
The new E-Money Directive seeks to facilitate greater market access to newcomers and Member States will have 18 months from publication to implement the new E-Money Directive into national law.
Implications of the New E-Money Directive for Ireland
Ireland intends to pro-actively implement the new E-Money Directive into Irish law ahead of the March 2011 deadline. The Irish Electronic Money and Payments Association ("EMPA") has also expressed an intention to create an e-money centre of expertise within the Financial Regulator and the Department of Finance, similar to that which already exists for the mutual funds industry.
In light of the favourable business and regulatory environment in Ireland for financial services, Ireland is well placed to attract EMLIs seeking a progressive location to establish within the EU.
US, Asian and non-EU companies actively seeking out Member States with innovation friendly regimes should consider Ireland as the domicile of choice, offering companies established and regulated in Ireland the opportunity to avail of the passporting arrangements under the new E-Money Directive.
Aims of the New E-Money Directive
The objectives of the new E-Money Directive are;
to enable innovation within the market to create tangible benefits for consumers, businesses and the wider internal market, by, for example,: modernising the definition of 'e-money', taking account of current and future uses of e-money; to establish a single passport for ELMIs so that ELMIs authorised in one EU Member State can issue e-money throughout the EU; to remove the prohibition on EMLIs conducting mixed business and to provide enhanced market access to new players so that real and effective competition between all market providers can be fostered by, for example, addressing current onerous prudential requirements; and to align the new E-Money Directive to ensure consistency with the Payment Services Directive (2007/64/EC) ("PSD"), as far as may be appropriate, thereby securing a level playing field between authorised non-bank ELMIs and authorised payment institutions (non-bank payment service providers authorised under the PSD regime), while also creating an overall harmonised framework for the payments market in Europe. The Commission's view is that the new E-Money Directive offers a second chance to the e-money market in the EU to expand, forecasting that its expected volume could reach up to Euro 10 billion by 2012.2
Whilst credit institutions will be required to comply with many of the provisions of the Directive, they may issue e-money under their existing authorisation (i.e. without the...