- Question ID
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2022_6421
- Legal act
- Directive 2009/110/EC (EMD)
- Topic
- Not applicable
- Article
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12
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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Not applicable
- Type of submitter
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Competent authority
- Subject matter
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EMI's application of negative interest rates to its clients
- Question
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Is an electronic money institution (EMI) allowed to apply negative interest rates to its clients (electronic money holders)?
- Background on the question
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Article 12 of the E-Money Directive (2009/110/EC) (hereinafter referred to as the Directive) only bans the granting of interest and those other benefits which are related "to the length of time during which the electronic money holder holds electronic money", as stated in recital (13). On the one hand, it could be implied that the Directive prohibits the linking of interest to the length of holding funds, but does not prohibit other cases, for instance, interest on current accounts. On the other hand, from the provisions of the Directive, it is not really obvious if EMIs are allowed to apply negative interests rates as it refers to only "the granting of interest and those other benefits" which may relate to the benefits that only positive interest rates could provide.
As credit institutions apply negative interest rates to the client fund accounts of EMIs, EMIs try to find ways to cover their costs, they shift the costs to their clients by applying negative interest rates to the accounts of their clients. As the Directive does not directly prohibit the EMIs’ application of negative interest rates to their clients, it is currently a grey area from a legal standpoint.
Additionally, the answer to this question is significant not only from a legal standpoint, but from a monetary policy standpoint as EMIs should not remain an island where the effects of negative interest rates could be avoided. Therefore, the implications of answer to this question should be evaluated in a broader sense. It is therefore necessary to determine whether and in what cases (for instance, interest on current accounts) the EMIs are allowed to apply negative interest rates.
- Submission date
- Final publishing date
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- Final answer
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Article 12 of Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money institutions (EMD2) provides that “Member States shall prohibit the granting of interest or any other benefit related to the length of time during which an electronic money holder holds the electronic money”.
This prohibition is related to and a consequence of the status of electronic money as distinct from deposits and other repayable funds. This delineation is articulated in Article 6(2) EMD2, which states that “electronic money institutions shall not take deposits or other repayable funds from the public within the meaning of Article 5 of Directive 2006/48/EC”. Article 6(3) EMD2 further states that any funds received by electronic money institutions from the electronic money holder shall be exchanged for electronic money without delay and shall not constitute either a deposit or other repayable funds received from the public within the meaning of Article 5 of Directive 2006/48/EC.
Since the funds received by electronic money institutions in exchange for electronic money must be converted into electronic money and do not constitute deposits or other repayable funds, there is no scope for the application of interest rates, regardless of whether they are positive or negative.
Disclaimer: The answer clarifies provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.
- Status
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Final Q&A
- Answer prepared by
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Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Disclaimer
The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.