EBA has published a peer review on authorisation of payment and e-money institutions under the Payment Services Directive (PSD2). It covers a three year period from 1 January 2019 – 31 December 2021. This falls under its Article 30 obligation to periodically conduct such peer reviews.
Generally, the authorisation process has increased in transparency and consistency, and that most competent authorities are enforcing EBA Guidelines in this area, but it also found that scrutiny of applications varied in consistency. In particular, there was a divergence in assessment of business plans, governance and internal controls. Applicants’ compliance with ‘local substance’ also varied.
The review also found that the average length of the application process varies significantly, from between 4 – 20 months or more. Reasons for delays include the quality of applicants’ applications and information provided, as well as different timelines and procedural approaches in national laws.
The review also recommends that EBA clarifies several processes including the boundaries between different categories of payment and e-money services and the criteria competent authorities should use in assessing the suitability of management.
The review sets out measures intended to address the inconsistencies and mitigate against ‘forum shopping’. There will be follow-up measures for all competent authorities, requiring them to:
- review resources and processes to ensure that they allow applications to be assessed within a reasonable timeframe;
- ensure that applicants have a ‘three lines of defence’ model that includes the functions of risk management, compliance and internal audit where appropriate; and
- ensure that applicants are effectively managed and controlled from the jurisdiction in which they seek authorisation.
EBA will review again in two years’ time.
Any future review is to provide more detailed guidance on how the proportionality principle should be applied when assessing the suitability of shareholders with qualifying holdings.