The FCA has proposed, for consultation, temporary guidance additional to its payment services approach document ("Approach Document") on safeguarding client's funds and managing prudential risks in the circumstances of the COVID-19 pandemic. This guidance also addresses how firms can put in place more robust plans for winding down.
The FCA plans to publish a Dear CEO Letter to payment services providers containing this guidance as amended in accordance with the consultation feedback.
A full consultation will be carried out later in the year on changes to the Approach Document, which will likely include this temporary guidance as amended.
Meanwhile, this temporary guidance will remain in place until the Approach Document is updated following the full consultation later in the year.
Some payment services firms are growing rapidly and many are unprofitable in the early stages, while they try to grow market share. We are also concerned that the pandemic will affect these firms’ financial strength and may affect the availability of their external funding. Guidance for firms on safeguarding and managing prudential risk is already available in our payment services approach document (Approach Document), but we have found evidence that some firms have not implemented the Electronic Money Regulations 2011 or Payment Services Regulations 2017 as we expect...So, we are bringing forward a short consultation on temporary guidance to provide additional clarity to help strengthen firms’ prudential risk management and their arrangements for safeguarding customers’ funds to help them meet our authorisation and supervisory expectations in these areas.