UK's FCA proposes stronger protection rules for e-money firms

25th Sep 2024 13:31

(Sharecast News) - Britain's financial watchdog is proposing to tighten up protections for customers holding cash in e-money institutions.

The Financial Conduct Authority on Wednesday said it had started a consultation after writing to chief executives in the sector in March 2023 about their safeguarding regimes in the event of the businesses going under. Since then it had opened supervisory cases on approximately 15% of firms that safeguard funds.

"Funds held by payments and e-money firms are not directly protected by the Financial Services Compensation Scheme (FSCS). Instead, firms must safeguard funds which can mean customers lose money or experience delays to money being returned if the firm fails," the FCA said in a statement.

Under the FCA's proposals, the existing e-money safeguarding regime will be replaced with a client assets-style regime designed to work with payments firms' business models. It will also publish strengthened interim safeguarding rules for firms by the middle of next year.

"We're consulting on proposals to make safeguarding rules stronger and clearer for payment and e-money firms so customers get as much of their money back as quickly as possible if the firm goes out of business," said Matthew Long, the FCA's director of payments and digital assets.

The consultation closes on December 17.

Reporting by Frank Prenesti for Sharecast.com