New Insolvency Regime for UK E-money and Payment Institutions

A new insolvency regime is being introduced for UK e-money/payment institutions. Some recent administration cases have taken years to resolve. Of six cases, only one has so far returned funds to customers! Comments on the draft regulations are requested to pemisar@hmtreasury.gov.uk by 14 January, and on related rules (to be published by 17 December) by 28 January. I expect that the regulations/rules will be introduced fairly quickly thereafter – possible a few weeks, depending on the feedback received. These are based on a similar scheme for investment banks, so it should be ‘tried and tested’.  

The 'special administration regime' will have the following features:

• the special administrator must return customer funds as soon as reasonably practicable and engage with payment systems and authorities in a timely fashion
  
• a deadline for claims to be submitted to speed up the distribution process
• a mechanism to transfer customer funds to a solvent institution
• post-administration reconciliation to top-up or drawdown safeguarded funds
• provisions for continuity of supply of services, to minimise disruption
• rules for treatment of shortfalls in safeguarding accounts
• rules for allocation of costs.