The UK Financial Conduct Authority has issued a statement confirming that it will comply with the Guidelines published by the European Banking Authority on December 12, 2017 on security measures for operational and security risks of payments services under the revised Payment Services Directive.

PSD2 takes effect on January 13, 2018. All Payment Services Providers will be expected to comply with the EBA Guidelines. The FCA reminds businesses wishing to apply for authorization or registration under PSD2, and any PSPs that are re-applying, that applications must contain a statement of the applicant’s security policy, taking into account the Guidelines. The statement of the applicant's security policy must also contain a description of the applicant's measures to comply with the provisions of the Payment Services Regulations 2017 that relate to the management of operational and security risks.

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The European Banking Authority has published an Opinion on the transition from the current Payment Services Directive to the revised Payment Services Directive, which takes effect from January 13, 2018.

Not all the provisions of PSD2 or technical standards and guidelines the EBA has been mandated to prepare under PSD2 will be applicable on January 13, 2018. This delay has led to a number of transitional issues that both market participants and national regulators have approached the EBA about. The Opinion provides clarification on the issues that have been raised and considers the implications for Payment Service Providers and national regulators of the delayed finalization and/or adoption of some of the technical standards and guidelines the EBA has been preparing under PSD2.

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HM Treasury has made two Orders which take effect from December 20, 2017.

The first Order amends the designation Order in force since April 2015 designating Cheque & Credit as a regulated payment system. The changes relate to the specification of the arrangements constituting Cheque & Credit, allowing for development in the Cheque & Credit Rules relating to the processing of the images of cheques and other paper instruments. The Order also makes references to participants as well as members of Cheque & Credit.

The second Order revokes the recognition order of January 5, 2010 specifying CHAPS as a recognized payment system under the Banking Act 2009.

View the Order amending the designation of Cheque & Credit.

View the Order for de-recognition of CHAPS.

The European Banking Authority has published a final report setting out final draft Regulatory Technical Standards and Implementing Technical Standards under the revised Payment Services Directive.

PSD2 requires that the EBA develop, operate and maintain an electronic central register that contains information as notified by national regulators. The EBA consulted earlier in the year on its proposals for the central register and that consultation closed in September 2017.

Read more.

The European Banking Authority has published finalized guidelines to assist payment services providers to conduct appropriate risk assessment and risk management of operational and security risks. The finalized guidelines contain some changes from the draft guidelines on which the EBA launched a consultation in May 2017.

Read more.

The US Federal Reserve Board announced that it is seeking comments regarding a proposed change to its Payment System Risk Policy.  In a related action, the Federal Reserve Board has also announced that it is eliminating the strength of support assessment (SOSA) ranking used for FBOs because the information that informs such rankings (such as information on parent banks, home country accounting practices and financial systems, and international regulatory developments) has become more readily available to U.S. supervisors.  The proposed changes to the PSR Policy would affect US branches and agencies of foreign banking organizations, and result in changes to the methods used in determining the net debit cap of an FBO and its ability to request a streamlined procedure with regard to the FBO’s maximum daylight overdraft capacity. The calculation method currently takes into account whether the FBO is a financial holding company, as well as the FBO’s SOSA ranking. The Federal Reserve Board notes that the changes to the PSR Policy may result in a reduction of the net debit cap for some FBOs, but contends that the changes will not constrain the US operations of FBOs generally, while more accurately reflecting the usage of intraday credit by FBOs. Comments to the proposal are due on or before February 12, 2018.

View the FRB's PSR Policy Proposal.

View FRB's SR Letter regarding SOSA.

The European Banking Authority has published its final draft Regulatory Technical Standards on central contact points under the revised Payment Service Directive. The RTS will apply where a payment institution or electronic money institution with its head office in one member state provides payment services on a cross-border basis, under the right of establishment, through agents in another (host) member state. PSD2 gives the national regulators in the host member state the option of requiring that payment institutions or electronic money institutions operating through agents must establish a central contact point in the host territory, to ensure adequate communication and information reporting and effective supervision.

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Vice Chairman for Supervision of the US Federal Reserve Board Randal Quarles provided remarks at the 2017 Financial Stability and Fintech Conference regarding innovation in the payments system. Vice Chairman Quarles noted that technological innovation has greatly changed our day-to-day lives, including in the financial services industry, but cautioned that utility and innovation need to be weighed against the potential ramifications that innovation has on the safety and soundness of the financial system. He noted that this tension is not intrinsically negative, but that care should be taken to maintain stability and safety. Vice Chairman Quarles provided commentary on digital currencies, stating that it may be important to separate underlying technology, such as distributed ledger technology, from the overall concept of digital currency itself. He expressed concerns regarding the wide-spread use of digital currency in its current form, and further cautioned that central-bank-issued digital currency may not be a viable alternative, noting that the latter would require extensive review and consultation about legal and risk issues.  However, he noted that research into digital currency issues, including for use as a settlement asset for wholesale payment systems should continue. In closing, Vice Chairman Quarles noted that prudent innovation may be the best course of action to balance the need for innovation with the need for stability.

View transcript of Vice Chairman Quarles’s remarks.

The Payment Systems and Services and Electronic Money (Miscellaneous Amendments) Regulations 2017 have been published and will enter into force in part on December 22, 2017 and in part on January 13, 2018.

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The Banking Act 2009 (Service Providers to Payment Systems) Order 2017 has been published and will enter into force in part on November 30, 2017 and in part on January 13, 2018.

Read more.

The European Commission has adopted a draft Delegated Regulation setting out Regulatory Technical Standards on the security measures for strong customer authentication along with common and secure open standards for the communication between account servicing payment service providers, payment initiation service providers, account information service providers, payers, payees and other payment service providers in relation to the provision and use of payment services.

Read more.

The European Commission has published a Report to the European Parliament and the Council of the European Union on the application of the SEPA Regulation. The SEPA Regulation establishes technical and business requirements for credit transfers and direct debits in euro to allow electronic payments in euro without distinguishing between national and cross-border payments. The Commission is charged, under the SEPA Regulation, with reporting on the application of the Regulation and proposing legislative changes, if appropriate. The Commission has concluded that the SEPA Regulation is applied correctly across the EU and that a legislative proposal is unnecessary. The Report notes that identified issues, such as IBAN discrimination, have been addressed by Member States and their resolution will need to be closely monitored.

View the Report.

View the Annex to the Report.

A Delegated Regulation has been published in the Official Journal of the European Union setting out Regulatory Technical Standards for the cooperation and exchange of information between EU national regulators that are the home and host states for payment institutions using the "passport" provided by the revised Payment Services Directive. Under PSD2, payment institutions can make use of the passport either to establish a branch in another Member State, or to provide services cross-border into another Member State. PSD2 will extend the definition of a "payment institution" to include new categories of third-party payment providers.

The RTS set out detailed rules on how national regulators are to assess passport applications and how they should deal with disagreements. The RTS also set out the information that must be obtained and/or transmitted or communicated on a branch, services or agent passport application.

The RTS come into effect on December 1, 2017. The PSD2 passport will be available from January 13, 2018, which is the transposition deadline for PSD2.

View the RTS ((EU) 2017/2055).

The European Banking Authority has published final Guidelines on the information to be provided for the authorization of payment institutions and electronic money institutions, and for the registration of account information service providers. The revised Payment Service Directive - PSD2 - sets out the information that must be submitted to national regulators with applications for authorization or registration. The Guidelines are divided into four sets, one for payment institutions, one for e-money institutions, one for account information service providers and one for national regulators. The Guidelines cover, among other things, information requirements on an applicant's program of operations, business plans, evidence of initial capital, governance and internal control mechanisms and data protection.

The Guidelines apply from January 13, 2018.

View the Guidelines.

The UK Payment Systems Regulator has published a report on the initiatives it has engaged in with banks, the payment systems industry and the Financial Conduct Authority to prevent or mitigate harm to consumers from scams which involve tricking people into sending money to fraudsters. This type of scam is known as an authorized push payment, or APP, scam and is the second biggest type of payment fraud reported in the UK behind card fraud. The PSR has previously investigated APP scams following a Which? super-complaint in 2016 and concluded in its response to the super-complaint that more needed to be done to address them.

Read more. 

The European Banking Authority has launched a consultation on draft Regulatory Technical Standards under the revised Payment Services Directive concerning the level of co-operation between national regulators in home and host states of a payment institution that operates cross-border in the European Union. PSD2 takes effect from January 13, 2018. The draft RTS specify the framework for the co-operation between the supervisors of payment institutions operating on a cross-border basis, including the method for co-operation and details of information that should be provided between regulators. The draft RTS also specify the means, details and frequency of any reporting that a host national regulator may request from payment institutions of the payment business activities carried out in its territory through agents or branches.

The EBA invites comments on the draft RTS by January 5, 2018.

View the consultation paper.

The U.K. Financial Conduct Authority has published a paper outlining the purpose and scope of its strategic review of retail banking business models. The FCA launched the strategic review in April 2017 in order to deepen its understanding of retail banking business models generally. The FCA also wants to gain an understanding of how changes such as increased use of digital services and reduced use of branches have impacted on banks’ business models and whether this might have implications for the FCA's consumer protection and competition objectives. The strategic review will also help the FCA to understand how free-if-in-credit banking is paid for and whether this gives rise to concerns about the distribution of profits from different types of consumers or different products.

The paper outlines how the FCA uses business model analysis in conduct and competition regulation before discussing how the face of retail banking is changing. A new environment has emerged due to the rise of challenger banks in response to macroeconomic, technological and regulatory changes, the profound effect of technology on costs and customer behaviour, the effect of recent regulatory changes on competition and the expected significant increase in competition that will be brought about by the Competition and Markets Authority's Open Banking initiative and the implementation revised Payment Services Directive.

Read more.

The European Banking Authority has published final Guidelines on complaints procedures for alleged infringements by payment service providers of the Payments Services Directive 2. PSD2 provides for payment service users and other interested parties, including consumer associations, to submit complaints to national regulators regarding alleged infringements of the PSD2 requirements by payment service providers. National regulators will be required to make available two different means by which a complaint can be submitted and to publicly disclose information on their procedures for complaints of alleged infringements. National regulators will also be required to provide complainants with certain information in response to their complaint. Furthermore, national regulators will need to have procedures in place to collate and analyze aggregated complaints information so that they can assess, for example, the nature of the most common types of complaints and the identity of the payment service providers subject to the most complaints. The final Guidelines will apply from January 13, 2018 and will be updated on a regular basis thereafter.

View the Final Report and Guidelines.

The Committee on Payments and Market Infrastructures is consulting on a possible strategy to improve the security of wholesale payments involving banks, financial market infrastructures and other financial institutions. The CPMI is a global standard setter, mandated to promote the safety and efficiency of payment, clearing, settlement and related arrangements. It formed a task force in 2016, to look into the evolving threat and increasing sophistication of wholesale payments fraud. The CPMI taskforce undertook a stocktake of current practices. The resulting discussion note highlights for consultation seven elements relating to preventing, detecting, responding to and communicating about wholesale payments fraud.

Stakeholders are invited to provide input on the proposed strategy by November 28, 2017. Consultation responses will contribute to guidance on the seven elements, which the CPMI aims to develop by early 2018.

View the CPMI Discussion Note.

The European Banking Authority has published a final report and final Guidelines on major incident reporting under the revised Payment Services Directive. PSD2 requires payment services providers to establish and maintain effective incident management procedures for, among other things, detecting and classifying major operational or security incidents. PSPs are required to notify their home state regulator if a major incident occurs.

The Guidelines apply to EU PSPs and to national EU regulators of EU PSPs and cover internal and external events that are malicious or accidental. The Guidelines also cover incidents that originate outside of the EU, but that affect the payment services provided by an EU PSP directly or indirectly. The Guidelines will apply across the EU from January 13, 2018.

The Guidelines set out the criteria that PSPs should use to classify an operational or security incident as "major" and the format for a PSP to notify its regulator of any major incident. The Guidelines also set out how national regulators should assess the relevance of the incident and the details that should be shared with other domestic authorities.

View the final report and Guidelines on major incident reporting under PSD2.

The European Banking Authority has launched a consultation on draft Guidelines on security measures for operational and security risks under the revised Payment Services Directive (known as PSD2). PSD2, which will apply from January 13, 2018, requires Payment Service Providers (PSPs) to establish a framework with appropriate mitigation measures and control mechanisms to manage operational and security risks, relating to the payment services they provide. The framework must include effective incident management procedures, including for the detection and classification of major operational and security incidents. A PSP is required to report to its national regulator annually, providing an updated and comprehensive assessment of the operational and security risks relating to the payment services they provide and on the adequacy of the mitigation measures implemented in response to those risks. The draft Guidelines aim to define those requirements and will apply to PSPs and national regulators responsible for monitoring the implementation of the requirements by PSPs.

Read more.

The Payment System Operator Delivery Group, an independently chaired body set up by the Payment Systems Regulator and the Bank of England, has published a recommended Delivery Plan for the consolidation of the operators of three payment system operators: Bacs Payment Schemes Ltd, Cheque and Credit Clearing Company and the Faster Payments Scheme Ltd. The proposed consolidation was one of the recommendations made in the Payments Strategy Forum's November 2016 report, which sets out a wide-ranging strategy for reforming the UK retail payments industry. The Delivery Plan includes a Strategic Framework (including company purpose and strategic objectives) for the new PSO, the proposed design of the PSO (including setting the company up as a company limited by guarantee), a funding model for setting up the consolidated PSO and for its ongoing operation and a target implementation timeline which also sets out a transitional scheme to ensure continuity of services.

The Delivery Plan now needs to be reviewed and agreed by the boards of the three operators as well as their members. If agreed, the aim is for the consolidation to be mostly completed by the end of 2017.

View the delivery plan.

The Payment Systems Regulator has opened a consultation on its proposed approach to monitoring and enforcing the revised Payment Services Directive. The UK Government has separately consulted on draft Payment Services Regulations 2017 which will implement the revised Payment Services Directive into national laws and replace the existing Payment Services Regulations 2009 and new FCA rules are also subject to consultation. PSD2 will repeal the current Payment Services Directive with effect from January 13, 2018. Member States must adopt, publish and apply implementing laws from that date, subject to certain exceptions and transitional measures.

Read more.

The Financial Conduct Authority has launched a consultation on changes to its rules resulting from implementation of the draft Payment Services Regulations 2017. The UK Government has separately consulted on draft Payment Services Regulations 2017 which will implement the revised Payment Services Directive into national laws and replace the existing Payment Services Regulations 2009.

Read more.

The Financial Conduct Authority has published a consultation paper on persistent credit card debt and earlier intervention remedies. The remedies and interventions outlined in the consultation paper form part of the overall package of remedies announced by the FCA in July 2016 in its credit card market study final findings report. The FCA then concluded that competition was working fairly well for the 30 million consumers who hold a credit card. However, the FCA expressed significant concerns regarding the scale, extent and the nature of persistent credit card debt and the limited incentives provided by firms to reduce this.

Read more.

The UK Payment Systems Regulator has published a Report outlining how it will use the money retained from any financial penalties it imposes. The PSR has decided to adopt the approach as outlined in its consultation paper published on November 11, 2017. The Report notes that a majority of respondents supported the proposals and summarizes the ten responses to the consultation. The PSR will use amounts retained to reduce regulatory fees levied in a particular year from payment service providers. As a result, some of the PSR's enforcement costs would be funded through penalties imposed, rather than through fees. The PSR's enforcement powers under the Financial Services (Banking Reform) Act 2013 allow the PSR to impose penalties for compliance failures on firms subject to regulation.

View the Report.

The Committee on Payments and Market Infrastructures published a report on distributed ledger technology in payment, clearing and settlement. In the context of payment, clearing and settlement, DLT enables entities to carry out transactions without relying on a central entity to maintain a single ledger. Financial market infrastructures are entrusted by their participants with maintaining a central ledger and, in some cases, managing certain risks on behalf of participants. It has therefore been commented that DLT could reduce the reliance on a central ledger managed by a FMI.

The objective of the report is to provide central banks and authorities with an analytical framework for assessing DLT arrangements, focusing on those that involve restricted ledgers where access is limited to approved users only.

Read more.

The European Banking Authority published final draft Regulatory Technical Standards on the requirements of strong customer authentication and secure communication under the revised Payment Services Directive (known as PSD2). PSD2, which will apply from January 13, 2018, requires payment service providers to apply strong customer authentication measures where the payer accesses its payment account online, initiates an electronic payment transaction or carries out any action through a remote channel, which may imply a risk of payment fraud or other abuses.

The final draft RTS supplement PSD2 with requirements for: (i) strong customer authentication; (ii) exemptions from the authentication requirements depending on: the level of risk involved in the service provided, the amount, the recurrence of the transaction, or both or the payment channel used for the execution of the transaction; (iii) security measures to protect the confidentiality and the integrity of payment service users' personalized security credentials; and (iv) common and secure open standards of communication between account servicing payment service providers, Payment Initiation Services providers, Account Information Services providers, payers, payees and other payment service providers.

The EBA consulted on the draft RTS during 2016. Following consultation feedback, the EBA made changes to the final draft RTS. The final draft RTS have been submitted to the European Commission for consideration and adoption. It is proposed that the final RTS would apply 18 months after it comes into effect, therefore the earliest the requirements would apply from is November 2018.

View the final draft RTS.

The European Banking Authority published for consultation draft Guidelines on complaints procedures for alleged infringements of the Payments Services Directive 2 by payment service providers. The PSD2 provides for payment service users and other interested parties, including consumer associations, to submit complaints to national regulators regarding alleged infringements of the PSD2 requirements by payment service providers.

The proposed Guidelines will apply to national regulators of payment service providers. The proposed Guidelines require national regulators to have two different means by which a complaint can be submitted and to publicly disclose information on their procedures for complaints of alleged infringements. National regulators will be required to request certain information from complainants and also to provide complainants with certain information in response to their complaint. Furthermore, national regulators will need to have procedures in place to collate and analyze aggregated complaints information so that they can assess, for example, the nature of the most common types of complaints and the identity of the payment service providers subject to the most complaints. Responses to the consultation are due by May 16, 2017. The final Guidelines will apply from January 13, 2018 and will be updated on a regular basis thereafter.

View the consultation paper.

The UK Government launched a consultation on implementation of the revised EU Payment Services Directive in the UK. The new Payment Services Directive (known as PSD2) aims to make payments between Member States as secure, easy and efficient as those made within a Member State. PSD2 focuses on electronic payments and payment services within the EU, regulating new types of payment services and payment services providers, which are currently unregulated, and stimulating competition in the electronic payments market. 

The Government's consultation comprises a consultation on issues to be considered in implementing PSD2 in the UK and proposed draft regulations. The draft regulations will revoke the existing Payment Services Regulations although large parts of the new draft regulations will replicate parts of the existing PSRs. Consequential changes will also be required to other UK legislation, including the Electronic Money Regulations 2011. The consultation is relevant to banks, building societies, e-money institutions, payment institutions and payment users. 

Read more.

The US Federal Reserve Board issued a progress report which outlined accomplishments and anticipated future steps related to the ongoing initiatives that the Federal Reserve Board has underway to enhance the speed, efficiency and security of the US payment system. The progress report highlights collaborative efforts that are being pursued by the Federal Reserve Board in conjunction with various private sector businesses, financial services providers, financial institutions, consumer groups and government agencies in furtherance of the strategies outlined in the January 2015 publication of “Strategies for Improving the US Payment System.” The progress report details the work-to-date and future plans of two payments industry task forces that have effectuated the initiatives—one devoted to faster payments and the other to a more secure payment system.

View the progress report.

The European Banking Authority launched a consultation on draft Guidelines on major incidents reporting under the Payment Services Directive 2. PSD2 requires payment service providers to notify their national regulator without delay of any major operational or security incident. The national regulator must assess the relevance of the incident to other authorities in its Member State and notify them accordingly. In addition, the national regulator must pass on the details of the incident to the EBA and the European Central Bank and, with them, assess the relevance of the incident to other EU bodies and Member States and notify them accordingly. 

The EBA is responsible for preparing Guidelines addresses to PSPs on the classification of major incidents and on the content, the format, including standard notification templates and the procedures for notifying an incident to their regulator. In addition, the EBA must prepare Guidelines for national regulators on the criteria for assessing the relevance of an incident and the details of the incident report to be shared with other authorities. Both Guidelines must be developed in close cooperation with the ECB. The EBA's consultation paper sets out the proposed Guidelines as developed by the EBA with the ECB. Responses to the consultation are requested by March 7, 2017. 

View the consultation paper.

The UK Payment Systems Regulator published a consultation paper and proposed guidance on the Financial Penalty Scheme that is applicable to penalty payment amounts retained by the PSR. The PSR’s enforcement powers under the Financial Services (Banking Reform) Act 2013 allow the PSR to impose penalties for compliance failures on firms subject to regulation. The PSR pays penalties it receives to HM Treasury whilst retaining an amount to cover enforcement costs. The PSR proposes to use the amount retained to reduce regulatory fees levied in a particular year from payment service providers. As a result, some of the PSR’s enforcement costs would be funded through penalties imposed, rather than through fees. The consultation paper outlines a number of situations that might arise and how the scheme could apply. For example, where payment service providers have become liable to pay penalties in the previous year and are also fee payers, the PSR would ensure that such parties do not receive any returned retained amounts under the Financial Penalty Scheme. Responses to the consultation are due by January 13, 2017.

View the consultation paper.

View the guidance on the Financial Penalty Scheme. 

The European Banking Authority published for consultation draft Guidelines on the detailed information required to be submitted with an application for authorization by payment institutions and electronic money institutions, and for the registration of account information service providers. The revised Payment Service Directive sets out the information that must be submitted to national regulators with applications for authorization or registration. The proposed Guidelines cover, amongst other things, information requirements on an applicant's program of operations, business plans, evidence of initial capital, governance and internal control mechanisms and data protection. The consultation closes on February 3, 2017.

View the consultation paper.

The Secure Payments Task Force, a 160-member task force convened by the US Federal Reserve Board to advance the safety, security and resiliency of the national payment system, requested comments from payment system industry participants in connection with its efforts to enhance three priority areas: (i) payment identity management; (ii) data protection and (iii) information sharing related to payments risk and fraud. For each of these focus areas, working group members have been meeting to document the current environment, the attributes of a more effective environment, the desired outcomes in each area and the barriers to implementation of recommended solutions.

The Secure Payments Task Force has been working across payment industry segments to define challenges and develop potential solutions. An online survey has been created to gather comments on how the task force is addressing challenges related to the three focus areas. The goal is to help ensure that the solutions being pursued will meet industry needs.
The survey was open for comment through November 8, 2016.

View Informatin regarind the survey.

The UK Payment Systems Regulator published the final Guidance on its approach to monitoring compliance with the EU Interchange Fee Regulation. The final Guidance consolidates the previous final Guidance published in March 2016 on enforcing compliance of the provisions of the Regulation that came into force on December 9, 2015, with the latest Guidance relating to provisions that subsequently came into force on June 9, 2016. The PSR has also published a Policy Statement which summarizes the main responses to the PSR's latest draft Guidance. 

The Interchange Fee Regulation imposes caps on interchange fees on consumer debit and credit card transactions where the issuer and acquirer are both located in the EEA. The final Guidance applies to payment card schemes, issuing and acquiring payment service providers, processing entities, other technical service providers and merchants. 

Read more.

Nearly 500 members of two national task forces convened by the US Federal Reserve Board began their review of nineteen proposals submitted by interested task force members across the payments industry that outline potential approaches for a faster payment system in the United States.

One task force is focused on faster payment capabilities, while the other is working to enhance payment system security. The review by the two task forces, each of which includes representatives of financial institutions, consumer groups, payment service providers, financial technology firms, businesses, government agencies and other interested parties, follows an independent analysis of the proposals by a global consulting firm, which assessed the proposals against 36 effectiveness criteria created by members of both task forces earlier this year.

A final two-part report is expected to result from the Faster Payments Task Force work effort. The first section, slated for release in January 2017, will describe the task force history and background. The report will detail gaps in the current payments landscape, identify opportunities for improvements and outline the benefits to the public of a faster payment system and the needs it would serve.

The second section of the final report, targeted for release in mid-year 2017, will include a discussion and assessment of the specific proposals, offering models of what an end-to-end faster payment system in the United States could look like and demonstrating how each proposal measured up against the various effectiveness criteria. This section will also identify strategic issues deemed important to the successful development of faster payments in the United States and recommend industry actions required to advance their implementation and adoption.

View Federal Reserve Board press release.

The Bank of England published a consultation paper proposing the introduction of a draft Code of Practice and Supervisory Statement on governance in recognized payment system operators. The final Code and the Supervisory Statement will contain the minimum governance requirements and expectations for recognized payment system operators to meet. Recognized payment systems include Bacs, CREST, CHAPS, LINK and Faster Payment Services. The Principles for financial market infrastructures, developed by the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions, form the basis of the draft Code although the Bank has also taken into account other sources such as the UK Corporate Governance Code. Amongst other things, the draft Code would require a recognized payment system operator to be a systemic risk manager (by promoting the safety and efficiency of the payment system and supporting the stability of the financial system), review its performance annually and document its governance policies and procedures. It would also set out the requirements for composition of the board and expectations on governance arrangements. It is not intended that the Code would apply to a recognized payment system that is operated by a recognized clearing house or central securities depository because those entities are already subject to similar requirements under the European Market Infrastructure Regulation or the Central Securities Depositories Regulation.  The Bank of England is proposing that the Code be implemented 12 months after publication of the final version. The consultation closes on December 2, 2016.

View the consultation paper. 

The European Banking Authority published a consultation paper proposing draft Guidelines on how to stipulate the minimum monetary amount of professional indemnity insurance required for authorization under the Payment Services Directive II. PSD2 entered into force on January 12, 2016, and will apply from January 13, 2018. The PSD2 recognizes new types of payment services that have emerged in the area of internet payments, such as payment initiation services and account information services. The PSD2 sets out the criteria on how to stipulate the minimum monetary amount of professional indemnity insurance or other comparable guarantee to be held by regulated firms. The draft Guidelines also set out the criteria, indicators, calculation methods and a formula that regulators should use when granting authorization or registration. The consultation paper explains the EBA's proposal for the use of a formula to calculate the minimum monetary amount of professional indemnity insurance or any comparable guarantee, when and how the lowest tier (the default value) should be used when calculating the monetary amount, provides details on indicators for the criteria set out in the PSD2 and the proposed methodology for some of the indicators. Responses to the consultation are due by November 30, 2016. 

View the consultation page. 

The European Banking Authority published proposed draft technical standards on fee terminology and disclosure documents under the Payment Accounts Directive. The PAD aims to assist consumers to understand the fees of payment service providers and to make informed decisions about which account is most suitable for customers, by setting common standards for PSPs across EU Member States, harmonising the terminology used by PSPs and introducing fee information templates. The EBA is responsible for preparing draft Regulatory Technical Standards setting out the Union standardized terminology for the most common services linked to a payment account, as well as  Implementing Technical Standards on the standardized presentation format of the fee information document (FID) and the statement of fees (SoF). The EBA's consultation paper sets out its proposed RTS and ITS, the options it has considered and the rationale for choosing the proposed requirements and examples of completed FIDs and SoFs. Responses to the consultation are due by December 22, 2016. 

View the consultation paper.

The UK Payment Systems Regulator published a decision designating the Current Account Switch Service operated by BACS Payment Schemes Limited as an alternative arrangement under the Payment Accounts Regulations 2015. This follows an application from BACS to the PSR on June 9, 2016, for the Current Account Switch Service to be designated as an alternative arrangement pursuant to the PARs.  The PARs make provision for the switching of a consumer’s payment account to a new account at the consumer’s request. Switching services must meet certain requirements, unless the PSR designates the service as an alternative arrangement. In order to be designated as an alternative arrangement, the scheme must meet certain criteria set out in the PARs, such as clearly being in the interests of consumers. 

View the Decision.

The European Banking Authority published a consultation paper on draft Regulatory Technical Standards specifying the requirements of strong customer authentication and secure communication under the revised Payment Services Directive (known as PSD2). PSD2, which will apply from January 13, 2018, requires payment service providers to apply strong customer authentication measures where the payer: (i) accesses its payment account online; (ii) initiates an electronic payment transaction; and (iii) carries out any action through a remote channel which may imply a risk of payment fraud or other abuses.  

Read more.

The Financial Conduct Authority published a policy statement on changes to the FCA Handbook to implement the Payment Accounts Regulations 2015 (PAR). The policy statement summarizes feedback from its consultation on the implementation of the PAR in March of this year and contains the subsequent final changes to the FCA Handbook and the finalized non-Handbook guidance. 

Changes to the Handbook and Guidance touch on various issues. Minor amendments have been made to the Guidance to provide clarity on the definition of a “payment account” in the Handbook and the scope of the PAR provisions on packaged accounts has been clarified. Amendments have also been made in relation to the regulatory reporting requirements. For example, the total number of refusals of switching and basic bank account applications would now need to be reported (rather than the proportion of total applications refused). The reporting deadline has also been extended to two months (instead of one month) after the end of the reporting period.

Changes to the Handbook and Guidance will come into effect on September 18, 2016, which is the same day as the date on which the Payment Account Regulations provisions on packaged accounts, switching and basic bank accounts enter into force.

View the policy statement.

The Financial Conduct Authority published its final report outlining findings from its credit card market study. The FCA credit card market study was launched in November 2014. The purpose of the study was to analyze the credit card market and determine whether it is working in the interest of consumers and to develop remedies to improve the situation if needed. Interim findings were published in November 2015 with potential remedies mooted for certain issues such as the frequent withdrawal of firms’ promotional offers and the fees associated with a single month’s missed payment. The final report summarizes feedback received on the interim report and outlines the FCA’s package of remedies.

The Payment Systems Regulator published its final report on its market review into the supply of indirect access to payment systems. Banks, building societies and other payment service providers rely on payment systems to transfer money between accounts. The PSR commented that provision of access to payment systems is essential in enabling effective supervision of and innovation in payments. Indirect access to payment systems occurs when one payment service provider relies on another payment service provider to provide access. The PSRs final conclusions remain largely unchanged from its interim report.    

The PSR concluded that generally, competition in the supply of indirect access appears to be producing some good outcomes. For example, large indirect payment service providers (IPSPs) have a number of options to access payments systems, there is a reasonable level of overall satisfaction with the quality of the indirect access offering that IPSPs receive. 

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The UK Payment Systems Regulator published a consultation paper on the application of provisions in the Interchange Fee Regulation, which take effect in the UK from June 9, 2016. The Regulation sets a limit on interchange fees on debit and credit card transactions where both the issuer and acquirer are located in the European Economic Area and outlines a number of business rule provisions that require affected parties to amend their business practices. The consultation paper is Phase II of the PSR’s consultation on the Regulation; the previous Phase I paper outlined the PSR’s powers and procedures as the designated regulator for monitoring and compliance of the Regulation. The Regulation came into effect on December 9, 2015. This consultation concerns the PSR’s approach to the remaining provisions which will come into effect on June 9, 2016, focusing on three areas: (i) business rules; (ii) monitoring and enforcement of the business rules; and (iii) amendments to the Phase I Guidance. 

Responses to the consultation were due by July 8, 2016.

View the consultation paper. 

View further information on Phase I guidance.

The UK Payment Systems Regulator published a Policy Statement and final Guidance on the application of the Payment Accounts Regulations 2015 in respect of alternative arrangements for switching accounts. The final guidance sets out the approach under the PSR to designating alternative switching schemes and is relevant to operators of alternative switching schemes, payment service providers, consumers and regulators.
 

The UK Payment Systems Regulator announced that after consideration, it had decided that it would not be imposing any new access or governance requirements on card payment schemes. The PSR introduced governance requirements for interbank payment systems in 2015. The PSR has considered the information it has gathered as well as the improvements made in the area through EU legislation, in particular, the Payment Services Regulations 2009. The PSR will continue to assess whether any changes are necessary.

View the announcement.

US Commodity Futures Trading Commission Commissioner Christopher Giancarlo discussed distributed ledger technology, commonly known as DLT or blockchain and its potential to "revolutionize the world of finance." He noted some of the potential uses of blockchain technology, including increasing settlement efficiency and speed, linking recordkeeping networks, reducing transaction costs and increasing market access. Giancarlo also noted potential opportunities in payments, banking, securities settlement, title recording, cyber security and trade reporting and analysis. Citing the collapse of Lehman Brothers, Giancarlo emphasized that blockchain technology could provide regulators better visibility into trading portfolios between counterparties, allowing them to react sooner in the face of financial deterioration. Analogizing the development of blockchain to the inception of the internet, Commissioner Giancarlo called on US regulators to let the private sector lead and to avoid impeding innovation and investment as the technology develops. He advocated for a principles-based approach developed in coordination between US and foreign regulators. Finally, he noted that regulators should revisit existing rules and recordkeeping requirements to be sure that they do not inhibit innovation. With respect to the CFTC specifically, he said his agency will revisit Rule 1.31 - a recordkeeping rule that requires all books and records to be kept in their original form or native file format.

View Commissioner Giancarlo’s speech.

The UK Payment Systems Regulator published its final Guidance on the application of the EU Interchange Fee Regulation. The IFR, which is directly applicable across the EU, applies to payment card schemes, issuing and acquiring payment service providers, processing entities, other technical service providers and, in certain circumstances, merchants. The IFR applies to the following payment card schemes: MasterCard, Visa Europe, American Express, Diners Club International, JCB International and Union Pay International. The PSR's Guidance covers: (i) the classification of schemes for IFR purposes; (ii) interchange fee caps and the possible exemption from those caps for some three-party schemes; (iii) the PSR's powers and procedures, including penalties for non-compliance; and (iv) the business rules.