Key takeaways
- EU e-money and payment institutions safeguard under the same directives, but each national supervisor applies them differently.
- Lithuania, Ireland and the Netherlands are among the most common EU licensing hubs for fintechs serving the whole single market.
- Supervisors in all three have increased scrutiny of safeguarding, with more focus on reconciliation evidence and independent review.
- Groups with entities in several hubs should run one reconciliation method and adapt only the reporting to each supervisor.
Same rules, different practice
Every EU e-money institution safeguards customer funds under the E-Money Directive and the Payment Services Directive. Both allow two methods: segregation of funds in a separate account at a credit institution or in secure, liquid, low-risk assets, or cover by an insurance policy or comparable guarantee. Funds must be safeguarded no later than the end of the business day following receipt.
For a group, the choice of hub also determines who will review its safeguarding arrangements, how often and how deeply. Some supervisors rely heavily on firms' own attestations, while others inspect on site and test reconciliation records directly. Those differences affect how much evidence a firm must hold and how quickly it must produce it.
The directives leave detail to member states and their supervisors. How often firms must reconcile, what evidence they must keep, whether independent safeguarding audits are expected, and how closely supervisors test all of this varies by country. A fintech choosing an EU licensing hub, or running entities in several, is choosing a supervisory culture as well as a legal regime.
Three major hubs
Lithuania has licensed a large number of e-money institutions serving customers across the EU, supervised by the Bank of Lithuania. After rapid growth in licences, the Bank of Lithuania has tightened its supervision, with more on-site inspections and closer attention to safeguarding and anti-money laundering controls.
Ireland, supervised by the Central Bank of Ireland, is a common base for larger payment and e-money groups, including many US firms. The Central Bank has publicly identified safeguarding weaknesses across the sector and has asked firms for independent review of their safeguarding arrangements.
The Netherlands, supervised by De Nederlandsche Bank, hosts several large payment institutions and acquirers. Its supervision emphasises the firm's own risk management and controls over customer funds, with attention to how firms evidence that funds are fully protected.
| Hub | Supervisor | Typical firms | Supervisory focus on safeguarding |
|---|---|---|---|
| Lithuania | Bank of Lithuania | Many smaller and mid-sized EMIs serving the EU | Inspections, segregation, reconciliation, AML linkage |
| Ireland | Central Bank of Ireland | Larger groups and US firms | Independent review, governance, reconciliation evidence |
| Netherlands | De Nederlandsche Bank | Payment institutions and acquirers | Risk management and controls over customer funds |
Running entities in several hubs
Groups often hold licences in more than one EU country, alongside UK and US entities. The efficient approach is one reconciliation method and data set, applied entity by entity, with reporting adapted to each supervisor. Each entity still reconciles separately, because safeguarding obligations attach to the entity, not the group. Our guide to multi-entity reconciliation explains the method.
Firms should also prepare for PSD3, which is expected to reduce the differences between hubs by applying a more harmonised standard. Firms in hubs with lighter practice today will feel the change most. Our country guides cover Lithuania, the Central Bank of Ireland safeguarding audit and DNB safeguarding in the Netherlands in detail.
Safeheld reconciles each EU entity daily and produces the evidence each national supervisor expects. See PSD2 safeguarding and Safeheld reconciliation.
Frequently asked questions
Do EU safeguarding rules differ by country?
The directives are the same, but national supervisors apply them differently, including on reconciliation frequency, evidence and independent review.
Which EU countries license the most e-money institutions?
Lithuania, Ireland and the Netherlands are among the most common licensing hubs for fintechs serving the EU.
When must EU firms safeguard funds?
No later than the end of the business day following receipt.
Will PSD3 harmonise safeguarding?
It is expected to apply a more consistent standard across member states.
References
About Safeheld
Safeheld reconciles client money every day, resolves every difference and prepares every regulatory return for sign-off, for regulated firms in the United States, the United Kingdom, the European Union, Canada, Australia, Singapore and Hong Kong. To discuss your operations, contact us at safeheld.com/contact.
This article is for general information and does not constitute legal or regulatory advice.