The European Banking Authority (EBA) has published its peer review on authorisation of payment institutions and e-money under the revised PSD2.
The review generally found increased transparency and consistency of the information required in the authorisation process. However, it also identified significant divergences in competent authorities’ assessment and the degree of scrutiny of applications.
The review, therefore, sets out a series of measures to address such divergencies, to level out the supervisory playing field and to mitigate against ‘forum shopping’.
The review examined the implementation of the EBA Guidelines in this area. Overall, the EBA found that competent authorities have largely or fully applied the Guidelines, thus contributing to consistency and transparency in the authorisation process.
However, the peer review identified divergent practices in relation to the assessment of business plans, applicants’ governance arrangements and internal control mechanisms. It also highlighted differences in applicants’ compliance with PSD2 requirements on ‘local substance’, such as the need for payment institutions to have their head office in the Member State where they are seeking authorisation and to conduct part of their activities there.
The report also shows that the average duration of the overall authorisation process varies significantly across competent authorities, ranging from 4 to 20 months or more. The quality of applications and applicants’ timeliness in addressing issues identified appear to be key reasons for delay, but different timelines set out in national laws and different procedural approaches in the acceptance and assessment of applications also cause variations in duration.
The review also concluded that any future review of the Guidelines should provide more detailed guidance on how the proportionality principle should be applied in assessing the suitability of shareholders with qualifying holdings.
Finally, the review recommends to the European Commission to clarify, as part of its ongoing PSD2 review process, the delineation between the different categories of payment services and e-money issuance, the applicable governance arrangements for institutions, including the criteria that competent authorities should use in assessing the suitability of management, and what having sufficient local substance requires.
The three European Supervisory Authorities (ESAs) have published a joint thematic report on national financial education initiatives on digitalisation.
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