Bank of Lithuania, Secure Nordic, project, Commission, SEB

Public consultation confirmed need to strengthen protection of funds of electronic money and payment institution customers

The Bank of Lithuania shall aim for the issue of increasing the protection of customer funds held by electronic money and payment institutions (EMIs/PIs) to be discussed at the European Union (EU) level and for the need to safeguard EMI/PI customer funds to be taken into account. The importance of harmonised regulation was evidenced by the results of the Bank of Lithuania public consultation on safeguarding EMI/PI customer funds.

“We believe that across the EU there should be the same position towards safeguarding EMI/PI customer funds held with credit institutions in case of insolvency of those credit institutions. The impact of national measures would not be significant, which is why the Bank of Lithuania has been raising this issue at various EU-level forums,” said Marius Jurgilas, Member of the Board of the Bank of Lithuania, assessing the situation and commenting on the opinion expressed by market participants during the public consultation.

He noted that non-bank payments market participants – EMIs/PIs – were increasingly more active in competing with the market incumbent banks when providing payment services. However, certain aspects of their activities tend to differ, such as customer funds being safeguarded in different ways. While deposits held in banks are covered by deposit insurance, customer funds held with EMIs/PIs are protected using other mechanisms – primarily, by separating customer funds from own funds and holding them in a separate account with a credit institution. Differences in customer fund protection are one of the reasons behind a perceived credibility gap between EMIs/PIS and banks.

Households and companies should have the ability to choose any payment service provider and trust them, regardless of their legal form. The Bank of Lithuania, taking into consideration the EMI/PI sector’s need to ensure due protection of customer funds, examined possible alternatives and, for this purpose, announced a public consultation.

The consultation document provides an analysis of measures that could help increase the protection of EMI/PI customer funds, especially in cases where credit institutions holding these funds become insolvent. Representatives of EMIs/PIs, banks, and the public sector expressed their opinions on more than 20 questions presented in the consultation. In total, eight were received. Relevant issues regarding customer fund protection were also discussed during bilateral meetings between the Bank of Lithuania and other interested parties.

Bank of Lithuania representatives will continue to actualise the aspects of safeguarding EMI/PI customer funds at EU-level discussions with representatives of other countries regarding the EU deposit insurance scheme.