Presentation on theme: "1 Current Developments in the Regulatory Framework of the International and European Banking System Assoc. Prof. Christos Vl. Gortsos Secretary General,"— Presentation transcript:
1 Current Developments in the Regulatory Framework of the International and European Banking System Assoc. Prof. Christos Vl. Gortsos Secretary General, HBA June 2010
2 Table of Contents International Level A. Operation and supervision of credit institutions B. Operation and supervision of capital markets C. Payment and settlement systems European Level A. The re-adjustment of the European financial supervisory framework B. Operation and supervision of credit institutions C. Operation and supervision of capital markets D. Payment and settlement systems
3 International Level A. Operation and supervision of credit institutions 1. Strengthening the resilience of the banking sector (December 2009) Basel Committee on Banking Supervision The Basel Committee on Banking Supervision has issued for consultation a package of proposals to strengthen global capital and liquidity regulations with the goal of promoting a more resilient banking sector To address the market failures revealed by the crisis, the Committee is proposing a number of fundamental reforms to the international regulatory framework.
4 International Level A. Operation and supervision of credit institutions 1. Strengthening the Resilience of the Banking sector (December 2009) Key Elements First, the quality, consistency, and transparency of the capital base will be raised. This will ensure that large, internationally active banks are in a better position to absorb losses on both a going concern and gone concern basis Second, the risk coverage of the capital framework will be strengthened. In addition to the trading book and securitisation reforms announced in July 2009, the Committee is proposing to strengthen the capital requirements for counterparty credit risk exposures arising from derivatives, repos, and securities financing activities.
5 International Level A. Operation and supervision of credit institutions 1. Strengthening the Resilience of the Banking sector (December 2009) Key Elements Third, the Committee will introduce a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 treatment, based on appropriate review and calibration. This will help contain the build up of excessive leverage in the banking system, introduce additional safeguards against attempts to game the risk based requirements, and help address model risk.
6 International Level A. Operation and supervision of credit institutions 1.Strengthening the Resilience of the Banking sector (December 2009) Key Elements Fourth, the Committee is proposing a series of measures to promote the build up of capital buffers in good times that can be drawn upon in periods of stress. A countercyclical capital framework will contribute to a more stable banking system, which will help dampen, instead of amplify, economic and financial shocks. Fifth, the Committee is introducing a global minimum liquidity standard for internationally active banks that includes a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio
7 International Level A. Operation and supervision of credit institutions 2. International framework for liquidity risk measurement, standards and monitoring (December 2009) Basel Committee on Banking Supervision Key elements of a robust framework for liquidity risk management board and senior management oversight; the establishment of policies and risk tolerance; the use of liquidity risk management tools such as comprehensive cash flow forecasting, limits and liquidity scenario stress testing; the development of robust and multifaceted contingency funding plans; and the maintenance of a sufficient cushion of high quality liquid assets to meet contingent liquidity needs
8 International Level A. Operation and supervision of credit institutions 2. International framework for liquidity risk measurement, standards and monitoring (December 2009) Establishment of a Liquidity Coverage Ratio The liquidity coverage ratio identifies the amount of unencumbered, high quality liquid assets an institution holds that can be used to offset the net cash outflows it would encounter under an acute short-term stress scenario specified by supervisors. The specified scenario entails both institution-specific and systemic shocks built upon actual circumstances experienced in the global financial crisis. This metric aims to ensure that a bank maintains an adequate level of unencumbered, high quality assets that can be converted into cash to meet its liquidity needs for a 30-day time horizon under an acute liquidity stress scenario specified by supervisors. At a minimum, the stock of liquid assets should enable the bank to survive until 30 days, by which time it is assumed that appropriate actions can be taken by management and/or supervisors, and/or the bank can be resolved in an orderly way.
9 International Level A. Operation and supervision of credit institutions 2. International framework for liquidity risk measurement, standards and monitoring (December 2009) Establishment of a Liquidity Coverage Ratio Stock of high quality liquid assets / Net cash outflows over a 30-day time period 100% The Liquidity Coverage Ratio (LCR) builds on traditional liquidity coverage ratio methodologies used internally by banks to assess exposure to contingent liquidity events. Net cumulative cash outflows for the scenario are to be calculated for 30 calendar days into the future. The standard would require that the value of the ratio be no lower than 100% The LCR consists of two components: A. Value of the stock of high quality liquid assets in stressed conditions. B. Net cash outflows, calculated according to the scenario parameters set by supervisors.
10 International Level A. Operation and supervision of credit institutions 2. International framework for liquidity risk measurement, standards and monitoring (December 2009) Establishment of a Net Stable Funding Ratio To promote more medium and long-term funding of the assets and activities of banks, the Committee has developed, in addition, the Net Stable Funding Ratio (NSFR). The net stable funding (NSF) ratio measures the amount of longer- term, stable sources of funding employed by an institution relative to the liquidity profiles of the assets funded and the potential for contingent calls on funding liquidity arising from off-balance sheet commitments and obligations. The standard requires a minimum amount of funding that is expected to be stable over a one year time horizon based on liquidity risk factors assigned to assets and off-balance sheet liquidity exposures. The NSF ratio is intended to promote longer-term structural funding of banks balance sheets, off-balance sheet exposures and capital markets activities.
11 International Level A. Operation and supervision of credit institutions 2. International framework for liquidity risk measurement, standards and monitoring (December 2009) Establishment of a Net Stable Funding Ratio In particular, the NSFR standard is structured to ensure that investment banking inventories, off-balance sheet exposures, securitization pipelines and other assets and activities are funded with at least a minimum amount of stable liabilities in relation to their liquidity risk profiles. The NSFR aims to limit over-reliance on wholesale funding during times of buoyant market liquidity and encourage better assessment of liquidity risk across all on and off-balance sheet items. Available amount of stable funding / Required amount of stable funding >100%
12 International Level A. Operation and supervision of credit institutions 3. Report and recommendations of the Cross-border Bank Resolution Group (March 2010) Basel Committee on Banking Supervision The report sets out ten recommendations that reflect the lessons from the recent financial crisis and seek to improve the resolution of a failing financial institution that has cross-border activities One of the challenges that arise in resolving a cross-border bank crisis is that crisis resolution frameworks are largely designed to deal with domestic failures and to minimise the losses incurred by domestic stakeholders The absence of a multinational framework for sharing the fiscal burdens for such crises or insolvencies is, along with the fact that legal systems and the fiscal responsibility are national, a basic reason for the predominance of the territorial approach in resolving banking crises and insolvencies
13 International Level A. Operation and supervision of credit institutions 3. Report and recommendations of the Cross-border Bank Resolution Group (March 2010) The Basel Committee's recommendations fall into three categories: 1. The first set addresses the strengthening of national resolution powers and their cross-border implementation 2. The second set deals with ex ante action and institution-specific contingency planning which involves the institutions themselves as well as critical home and host jurisdictions 3.The third set focuses on reducing contagion and limiting the impact on the market of the failure of a financial firm, by actions such as further strengthening of netting arrangements
14 International Level A. Operation and supervision of credit institutions 4. Principles for enhancing corporate governance (March 2010) Basel Committee on Banking Supervision The Basel Committee's guidance: assists banking supervisors and provides a reference point for promoting the adoption of sound corporate governance practices by banks in their countries, also serves as a reference point for the banks' own corporate governance efforts
15 International Level A. Operation and supervision of credit institutions 4. Principles for enhancing corporate governance (March 2010) The key areas where the principles have been strengthened include: the role of the board, the qualifications and composition of the board, the importance of an independent risk management function, including a chief risk officer or equivalent, the importance of monitoring risks on an ongoing firm-wide and individual entity basis, the board's oversight of the compensation systems, and the board and senior management's understanding of the bank's operational structure and risks The principles also emphasize the importance of supervisors regularly evaluating the bank's corporate governance policies and practices
16 International Level A. Operation and supervision of credit institutions 5. Principles for sound compensation practices (March 2010) Financial Stability Board Compensation practices at large financial institutions are one factor among many that contributed to the financial crisis that began in 2007 High short-term profits led to generous bonus payments to employees without adequate regard to the longer-term risks they imposed on their firms These perverse incentives amplified the excessive risk-taking that severely threatened the global financial system and left firms with fewer resources to absorb losses as risks materialized To date, most governing bodies (henceforth board of directors) of financial firms have viewed compensation systems as being largely unrelated to risk management and risk governance The FSB principles are intended to apply to significant financial institutions, but they are especially critical for large, systemically important firms
17 International Level A. Operation and supervision of credit institutions 5. Principles for sound compensation practices (a) Effective governance of compensation The firms board of directors must actively oversee the compensation systems design and operation The firms board of directors must monitor and review the compensation system to ensure the system operates as intended Staff engaged in financial and risk control must be independent, have appropriate authority, and be compensated in a manner that is independent of the business areas they oversee and commensurate with their key role in the firm
18 International Level A. Operation and supervision of credit institutions (b) Effective alignment of compensation with prudent risk taking Compensation must be adjusted for all types of risk Compensation outcomes must be symmetric with risk outcomes Compensation payout schedules must be sensitive to the time horizon of risks The mix of cash, equity and other forms of compensation must be consistent with risk alignment (c) Effective supervisory oversight and engagement by stakeholders Supervisory review of compensation practices must be rigorous and sustained, and deficiencies must be addressed promptly with supervisory action Firms must disclose clear, comprehensive and timely information about their compensation practices to facilitate constructive engagement by all stakeholders
19 International Level A. Operation and supervision of credit institutions 6. A fair and substantial contribution by the financial sector - Interim Report International Monetary Fund The financial crisis required many G-20 governments to provide extensive support to their financial sectors, especially in advanced countries. For the advanced G-20 economies, pledged public support was massive, but was used only in part, and is in part being repaid. This interim report proposes two forms of contribution from the financial sector, serving distinct purposes: 1.A Financial Stability Contribution (FSC) linked to a credible and effective resolution mechanism. The main component of the FSC would be a levy to pay for the fiscal cost of any future government support to the sector. 2.Any further contribution from the financial sector that is desired should be raised by a Financial Activities Tax levied on the sum of the profits and remuneration of financial institutions, and paid to general revenue.
20 International Level B. Operation and supervision of capital markets Fit and Proper Assessment – Best Practice (November 2009) IOSCO The IOSCO believes that the maintenance of fit and proper standards is essential to ensuring that business activities in financial sector are conducted with high standards of market practice and integrity. Best Practices are designed to ensure that intermediaries providing financial services are soundly and prudently managed, directed and that none of the key persons may be a source of weakness to those entities. The purpose of the Best Practices 1.To support the development of a common understanding of what fit and proper assessments involve, 2.To outline the principles involved in applying fit and proper tests, 3.To indicate good practices in the design and implementation of an effective fit and proper assessment approach.
21 European Level A. The re-adjustment of the European financial supervisory framework The basis of the reform is the so-called de Larosière Report, a Report by a high-level group on financial supervision in the EU, chaired by Jacques de Larosière, presented to the European Commission on 25 February The orientation of the report was accepted by the Commission and endorsed by the European Council in June 2009.
22 European Level A. The re-adjustment of the European financial supervisory framework The new enhanced framework will consist of: (a) the European Systemic Risk Board (ESRB), which will be entrusted with the task of macro-prudential supervision. The ESRB will be responsible for the macro-prudential oversight of the whole financial system within the EU in order to contribute: to the prevention or mitigation of systemic risks to EU financial stability, and to the smooth functioning of the internal market. The ECB/ESCB will be charged with this responsibility in the European Union
23 European Level A. The re-adjustment of the European financial supervisory framework The new enhanced framework will consist of: (b) the European System of Financial Supervisors (ESFS), which will be a network of authorities, competent for issues of micro- prudential supervision. There will be three European authorities: the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA).
24 European Level A. The re-adjustment of the European financial supervisory framework The powers of the EBA (taken as an example) will consist mainly in: the development of technical standards suggested to the Commission for their adoption under the form of binding acts, the issuance of (non compulsory) guidelines and recommendations, the adoption of decisions addressed to the competent authorities as a contribution to the consistent application of the EU law and in case of emergency or for the settlement of disputes among authorities, and decisions directly addressed to financial institutions requiring the necessary action to comply with their obligations under EU law
25 European Level A. The re-adjustment of the European financial supervisory framework The European Commission submitted legislative proposals for the implementation of the report on 23 September 2009 These texts include: 3 proposals for Regulations establishing respectively the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), a proposal for a Regulation establishing the European Systemic Risk Board (ESRB), and a decision entrusting the ECB with specific tasks concerning the European Systemic Risk Board Moreover, the Commission proposed on 26 October 2009 a Directive amending a number of Directives in respect of the EBA, the ESMA and the EIOPA (the so-called omnibus Directive)
26 European Level B. Operation and supervision of credit institutions 1. Prudential regulation of credit institutions The objective of the new regulatory framework for the prudential regulation of credit institutions, already adopted or under consultation, is the establishment of comprehensive and risk-sensitive rules, and the fostering of enhanced risk management by credit institutions (and investment firms). The review of Directives 2006/48/EC and 2006/49/EC is taking place gradually through three sets of revisions: the first set has already been adopted by Directive 2009/111/EC (see below, under 1.1), the second set is included in a proposal for a Directive under consultation (under 1.2), and the third set, still at an early stage of consultation, reflects fully the expected amendments to the so-called Basel II framework by the Basel Committee on Banking Supervision (under 1.3).
27 European Level B. Operation and supervision of credit institutions 1.1 Directive 2009/111/EC (November 2009) The major amendments introduced by Directive 2009/111/EC, whose provisions shall apply by 31 December 2010, are the following: (a) The Directive introduces the term of significant branches. For a branch of a credit institution established in a host member state to be considered as significant, the competent authorities of the host member state must, if specific requirements are fulfilled, make a request to the consolidating supervisor or to the competent authorities of the home member state of the credit institution. This provision has been introduced in order to reinforce the information rights of host supervisors, taking into account that information deficits between home and the host competent authorities have proved detrimental, during the recent crisis, to the financial stability in host member states (and might prove again).
28 European Level B. Operation and supervision of credit institutions 1.1 Directive 2009/111/EC (b) Specific criteria have been set for hybrid capital instruments to be eligible for inclusion in credit institutions original own funds. The alignment of the criteria has been considered necessary taking into account that hybrid capital instruments play an important role in the ongoing capital management of credit institutions and allow them to achieve a diversified capital structure and to access a wide range of financial investors. According to the new Directive, original own funds referred to in Article 57(a) of Directive 2006/48/EC should include all instruments that are regarded under national law as equity capital, rank pari passu with ordinary shares during liquidation and fully absorb losses on a going-concern basis pari passu with ordinary shares.
29 European Level B. Operation and supervision of credit institutions 1.1 Directive 2009/111/EC (c) The regulatory framework on the monitoring and control of credit institutions large exposures has been enhanced. Since a loss arising from an exposure to a credit institution can be as severe as a loss from any other exposure, such exposures should be treated and reported in the same manner as any other exposures. However, an alternative quantitative limit has been introduced to alleviate the disproportionate impact of such an approach on smaller institutions. (d) Colleges of Supervisors have been established for the purpose of strengthening the coordination of the competent authorities with the aim to strengthen the efficiency of the prudential supervision and regulation of a banking group on a consolidated basis and to mitigate systemic risk. Their establishment should be an instrument for stronger cooperation by means of which competent authorities reach agreement on key supervisory tasks.
30 European Level B. Operation and supervision of credit institutions 1.2 Proposal for a Directive for further review of Directives 2006/48/EC and 2006/49/EC (July 2009) The main changes proposed are as follows: (a) Enhancement of capital requirements relating to re- securitization, in order to ensure that credit institutions take proper account of the risks of investing in such complex financial products. According to the Commission, re-securitisations have played a significant role in the development of the recent financial crisis. (b) Enhancement of disclosure requirements for securitisation exposures, in order to ensure market confidence and encourage the smooth operation of interbank markets, which was seriously negatively affected during the recent financial crisis.
31 European Level B. Operation and supervision of credit institutions 1.2 Proposal for a Directive for further review of Directives 2006/48/EC and 2006/49/EC (July 2009) The main changes proposed are as follows: (c) Strengthening of capital requirements for the trading book (i.e., for exposure to market risks), in order to ensure that the assessment of risks connected with it fully reflect the potential losses from adverse market movements under stressed conditions. (d) Establishment of the obligation for credit institutions to apply sound remuneration policies that do not encourage or reward excessive risk- taking. The competent authorities will be given the power to sanction credit institutions with remuneration policies that do not comply with the new requirements. However, the amount and form of remuneration and the ultimate responsibility for the design and application of their remuneration policy remain to to the discretion of credit institutions. The proposed high-level principles concern remuneration for staff whose professional activities have a material impact on the risk profile of credit institutions.
32 European Level B. Operation and supervision of credit institutions 1.3 Additional amendments to Directives 2006/48/EC and 2006/49/EC (February 2010) - Staff working document on additional amendments to Directives 2006/48/EC and 2006/49/EC, relating to the following areas: (a) The establishment of two regulatory standards for liquidity risk in order to promote both short-term and longer-term resilience of the liquidity risk profile of credit institutions. (b) The re-definition of regulatory capital in order to strengthen, harmonise and simplify the existing framework (core tier 1 capital, non-core tier 1 capital, tier 2 capital and tier 3 capital) (c) The introduction of a leverage ratio to supplement the risk- based minimum capital requirement ratio across the economic cycle.
33 European Level B. Operation and supervision of credit institutions 1.3 Additional amendments to Directives 2006/48/EC and 2006/49/EC (d) The amendment of the treatment of the counterparty credit risk and, specifically, the enhancement of the capital requirements for counterparty credit exposures arising from credit institutions derivatives, repo and securities financing activities, providing, by this way, additional incentives to move over-the-counter (OTC) derivative contracts to central counterparties in order to reduce exposure to systemic risk. (e) The introduction of counter-cyclical regulatory measures (through-the-cycle provisioning and creation of counter-cyclical buffer).
34 European Level B. Operation and supervision of credit institutions 1.3 Additional amendments to Directives 2006/48/EC and 2006/49/EC (f) The introduction of tougher prudential requirements for the systemically important financial institutions, in order to reduce their exposure to moral hazard and, hence, the frequency and severity of financial crises. (g) The establishment of a single rulebook at least in specific areas. According to the Commission, a single rulebook does not mean uniform rules regardless of specific national circumstances (…). But at the same time, it makes sure that same things are treated the same way, i.e., that a product, specific as it may be to a national market, is treated the same by whoever offers that product and independent of in which Member State that bank is authorized
35 European Level B. Operation and supervision of credit institutions 2. Deposit guarantee schemes In order to restore confidence in the European banking system and to enhance its stability during the recent international financial crisis, it was considered necessary to take measures in order to enhance the protection of deposits in credit institutions established in the EU and to further promote the convergence of national deposit guarantee schemes. In this context, in March 2009 Directive 2009/14/EC of the European Parliament and of the Council was issued, amending Directive 94/19/EC on deposit guarantee schemes. The main amendments introduced by Directive 2009/14/EC, whose provisions should be (and have been) implemented by member states by 30 June 2009, are the following: (a) The minimum coverage level provided by deposit guarantee schemes (if it has been determined that the deposits of a credit institution are unavailable), has been increased (from euro 20,000 before) to euro 50,000 for the aggregate deposits of each depositor, and, by 31 December 2010, to euro 100,000.
36 European Level B. Operation and supervision of credit institutions 2. Deposit guarantee schemes (b) The payout period has been reduced to twenty (20) working days (from three (3) months before). This period can be extended for another ten (10) working days only under exceptional circumstances, in special cases, and upon approval by the competent authorities. (c) When the payout is triggered by a determination of the competent authorities that the deposits of a credit institution are unavailable (and not by a ruling of a judicial authority), this determination must be made at the latest within five (5) working days (from twenty-one (21) days before), after first becoming satisfied that a credit institution has failed to repay deposits which are due and payable. (d) Information requirements to actual and intending depositors have been enhanced.
37 European Level B. Operation and supervision of credit institutions 2. Deposit guarantee schemes (e) The European Commission ought to submit a report to the European Parliament and the Council by 31 December 2009 relating to: the harmonisation of the funding mechanisms of deposit-guarantee schemes, the appropriateness and modalities of providing for full coverage for certain temporarily increased account balances; possible models for introducing risk-based contributions; the benefits and costs of a possible introduction of a Community deposit- guarantee scheme; the impact of diverging legislations as regards set-off, where a depositors credit is balanced against its debts, on the efficiency of the system and on possible distortions, taking into account cross-border winding-up; the harmonisation of the scope of products and depositors covered, the link between deposit-guarantee schemes and alternative means for reimbursing depositors, such as emergency payout mechanisms
38 European Level B. Operation and supervision of credit institutions Moreover, in order to contribute to the further convergence of banking regulatory practices across the EU, the Committee of European Banking Supervisors (CEBS) has already adopted or launched consultations on various aspects, such as: liquidity buffers, stress testing, hybrid capital instruments, large exposures regime, the operational functioning of colleges, instruments referred to in Article 57(a) of Directive 2006/48/EC, operational risk mitigation techniques, concentration risk, and risk management
39 European Level C. Operation and supervision of capital markets 1. Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies this Regulation introduces a common regulatory approach in order to enhance the integrity, transparency, responsibility, good governance and reliability of credit rating activities, contributing to the quality of credit ratings issued in the Community, thereby contributing to the smooth functioning of the internal market while achieving a high level of consumer and investor protection it lays down conditions for the issuing of credit ratings and rules on the organisation and conduct of credit rating agencies to promote their independence and the avoidance of conflicts of interest it applies to credit ratings issued by credit rating agencies registered in the Community and which are disclosed publicly or distributed by subscription.
40 European Level C. Operation and supervision of capital markets 1. Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies The main provisions of this Regulation relate to: the independence and avoidance of conflicts of interests with respect to the issuing of a credit rating, the conditions which must be fulfilled by rating analysts, employees and other persons involved in the issuing of credit ratings, obligations with respect to the disclosure of methodologies, models and key rating assumptions used by CRAs the surveillance of credit rating activities, the competent authorities and the cooperation between competent authorities
41 European Level C. Operation and supervision of capital markets 2. Other important regulatory developments on capital markets: Directive 2009/65/EC on Undertakings for Collective Investment in Transferable Securities (UCITS), proposal for a Directive of the European Parliament and the Council on Alternative Investment Fund Managers, review of the Prospectus Directive, review of Directive 2004/39/EC on markets in financial instruments (MiFID), review of Directive 2003/6/EC on market abuse, and the Communications of the European Commission on derivatives markets,
42 European Level D. Payment and settlement systems 1. Cross-border payments in the European Union Regulation (EC) 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro established the principle of equality of charges between cross-border payments in euro and the corresponding payments within a member state, which applied to cross-border payments in euro (and in Swedish kronor) up to euros 50,000, or equivalent A report of the European Commission of 2008 on the application of this Regulation confirmed that it has effectively led to the reduction of charges for cross-border payment transactions in euro to the level of national charges and it has encouraged the European payments industry to make the necessary efforts to build a pan-European infrastructure for payments, leading to the creation of the Single European Payaments Area (SEPA)
43 European Level D. Payment and settlement systems However, the same report identified the need for a number of amendments to the Regulation. Accordingly, the European Parliament and the Council adopted in September 2009 Regulation 924/2009, which applies, mainly, as of 1 November Its main provisions concern the following: (a) Each national payment corresponding to a cross-border payment must be identified using the following exhaustive criteria: the channel used to initiate, execute and terminate the payment, the degree of automation, any payment guarantee, customer status and relationship with the payment service provider, or the payment instrument used. (b) Standardisation as regards, in particular, the use of the International Bank Account Number (IBAN) and the Bank Identifier Code (BIC) is further promoted.
44 European Level D. Payment and settlement systems (c) As of 1 January 2010, settlement-based national reporting obligations on payment service providers for balance of payments statistics related to payment transactions of their customers up to euro 50,000 have been removed. (d) The reachability for direct debit transactions has also been established: by 1st November 2010 a payment service provider of a payer reachable for a national direct debit transaction denominated in euro on the payment account of that payer shall be reachable, in accordance with the direct debit scheme, for direct debit transactions denominated in euro initiated by a payee through a payment service provider located in any member state.
45 European Level D. Payment and settlement systems 2. Directive 2009/110/EC on electronic money institutions this Directive lays down the rules for the pursuit of the activity and prudential supervision of the business of issuing electronic money by this Directive electronic money institutions are considered for the purposes of the Directive 2006/48/EC as financial institutions (and not as credit institutions)