- Question ID
-
2022_6421
- Legal act
- Directive 2009/110/EC (EMD)
- Topic
- Not applicable
- Article
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12
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
-
Not applicable
- Type of submitter
-
Competent authority
- Subject matter
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EMI's application of negative interest rates to its clients
- Question
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Is an electronic money institution (EMI) allowed to apply negative interest rates to its clients (electronic money holders)?
- Background on the question
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Article 12 of the E-Money Directive (2009/110/EC) (hereinafter referred to as the Directive) only bans the granting of interest and those other benefits which are related "to the length of time during which the electronic money holder holds electronic money", as stated in recital (13). On the one hand, it could be implied that the Directive prohibits the linking of interest to the length of holding funds, but does not prohibit other cases, for instance, interest on current accounts. On the other hand, from the provisions of the Directive, it is not really obvious if EMIs are allowed to apply negative interests rates as it refers to only "the granting of interest and those other benefits" which may relate to the benefits that only positive interest rates could provide.
As credit institutions apply negative interest rates to the client fund accounts of EMIs, EMIs try to find ways to cover their costs, they shift the costs to their clients by applying negative interest rates to the accounts of their clients. As the Directive does not directly prohibit the EMIs’ application of negative interest rates to their clients, it is currently a grey area from a legal standpoint.
Additionally, the answer to this question is significant not only from a legal standpoint, but from a monetary policy standpoint as EMIs should not remain an island where the effects of negative interest rates could be avoided. Therefore, the implications of answer to this question should be evaluated in a broader sense. It is therefore necessary to determine whether and in what cases (for instance, interest on current accounts) the EMIs are allowed to apply negative interest rates.
- Submission date
- Status
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Question under review
- Answer prepared by
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Answer prepared by the European Commission because it is a matter of interpretation of Union law.