PSD2 article 10(1)(a) require of Payment Institutions (PIs) that "[funds to be safeguarded] shall be deposited in a separate account in a credit institution".
Our question is whether an PI authorised and operating in an EU Member State may use a credit institution based in a third country (e.g. UK)?
In researching this question, we have looked at the definition of "credit institution" to see whether this contains any relevantt restrictions, but we cannot find any.
We first looked at PSD2, but the text does not explicitly define "credit institution". However, PSD2 article 112(2) amends the definition of "credit institution" in Regulation (EU) No 1093/2010 to be "credit institutions as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013".
Regulation (EU) No 575/2013, Article (4)(1)(1) states:
"(1) ‘credit institution’ means an undertaking the business of which consists of any of the following:
(a) to take deposits or other repayable funds from the public and to grant credits for its own account;
(b) to carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU of the European Parliament and of the Council ( 6 ), where one of the following applies, but the undertaking is not a commodity and emission allowance dealer, a collective investment undertaking or an insurance undertaking:
(i) the total value of the consolidated assets of the undertaking is equal to or exceeds EUR 30 billion;
(ii) the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in that group that individually have total assets of less than EUR 30 billion and that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion; or
(iii) the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in the group that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion, where the consolidating supervisor, in consultation with the supervisory college, so decides in order to address potential risks of circumvention and potential risks for the financial stability of the Union;
for the purposes of points (b)(ii) and (b)(iii), where the undertaking is part of a third‐country group, the total assets of each branch of the third‐country group authorised in the Union shall be included in the combined total value of the assets of all undertakings in the group;"
Furthermore, the UK Electronic Money Regulations (2017) have been amended to explicitly allow UK EMIs to safeguard funds with third country credit institutions - c.f. https://www.legislation.gov.uk/uksi/2018/1201/schedule/2/paragraph/7/made
"Regulation 21, paragraph 8: "“approved foreign credit institution” means— ...
(b)a credit institution that is supervised by the central bank or other banking regulator of an OECD state"
==> In conclusion, our research leads us to believe that it is permissible for an EU PI to safeguard funds in a third country credit institution.
- Legal act: Directive 2015/2366/EU (PSD2)
- COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
