Authorisation of Electronic Money Institutions
Authorisation of Electronic Money Institutions
The aim of this Guide is to introduce persons concerned to the authorisation process for electronic money institutions conducted by the Bank of Lithuania, requirements for electronic money institutions being established (legal persons not yet established) or being authorised (already established legal persons), set out the approach of the Bank of Lithuania to new market participants, set out a list of the documents to be submitted with an application for authorisation, and to identify other major aspects of authorisation.
License of an electronic money institution
The Republic of Lithuania Law on Electronic Money Institutions (hereinafter ‘the Law’) lays down that ‘electronic money’ means a monetary value as represented by a claim on the issuer which is issued on receipt of monetary funds (hereinafter referred to as ‘funds’) by the electronic money issuer from a natural or legal person and has the following characteristics:
- stored electronically (incl. magnetically);
- is issued for the purpose of making payment transactions;
- is received by persons other than electronic money issuers.
In order to accept money from clients in the electronic domain and to hold it in payment accounts for a relatively long time, issuing electronic money and then redeeming it, prior to that it is necessary to become an electronic money issuer (this can only be done by credit institutions, electronic money institutions (EMIs) and some other institutions).
It is worthwhile noting that the Law provides that EMIs shall be entitled to not only issuing electronic money in the Republic of Lithuania and/or other Member States, but also providing the services specified in Article 5 of the Republic of Lithuania Law on Payments (providing payment services, e.g. issuing and/or acquiring of payment instruments, money transfers and other services). Due to this reason, an EMI differs from a payment institution in that an EMI may withhold client funds, whereas payment institutions cannot do so (the position of the Bank of Lithuania on funds held in payment accounts is available here).
Licence of an electronic money institution to engage in restricted activities
To establish a favourable environment for Lithuanian and foreign startups, a special project for an EMI licence to engage in restricted activities has been implemented with the aim of facilitating access of new market participants to the Lithuanian market and later, after being granted a licence to engage in usual activities, to also the European Economic Area market. The basic difference between an EMI engaged in restricted activities and a traditional EMI is that the EMI engaged in restricted activities is not subject to the minimum initial capital requirement; however, a licence of an electronic money institution to engage in restricted activities is valid solely in the Republic of Lithuania. In order to be granted an EMI licence, it is necessary to hold a capital of EUR 350,000; however, this licence entitles to the provision of the electronic money issuance and redemption, distribution and payment services in other EU Member States as well after carrying out a notification procedure.
The approach of the Bank of Lithuania to the authorisation process for EMIs, as well as for other institutions, is, as far as possible, an open one and normally begins well before an application for an authorisation is submitted to it. We encourage all applicants who actively seek an EMI licence to contact us as early as possible so that we could discuss their planning process and help determine financial servisces that have to be licensed. This allows us to be clearer in explaining the authorisation process and its meaning, our requests, requirements, expectations and all other major aspects that may affect the authorisation process.
The following basic stages in the authorisation process can be singled out:
- submission of an application for an EMI licence to the Supervision Service of the Bank of Lithuania (hereinafter ‘Supervision Service’): the Supervision Service, within 5 business days, reviews whether all necessary documents have been submitted and, where no formal deficiencies are identified, accepts the application for consideration;
- assessment of an application for a licence of an EMI and attached documents: where the documents submitted have no deficiencies, the licence is issued within the shortest possible 3 month-term (for an EMI licence to engage in restricted activities - within a 2 month-term). Nevertheless, our experience shows that submitted documents in only exceptional cases do not contain deficiencies of some sort; therefore, the Supervision Service usually submits comments to the applicant for an EMI licence, asking to submit additional information or documents. In that case, the time limit for assessment is extended;
- issuance of a licence or refusal to issue a licence: after finishing assessment of submitted documents, the Board of the Bank of Lithuania analyses summary information submitted by the Supervision Service and takes a decision regarding the issuance of a licence or refusal to issue it.
The laws provide that an application for a licence of an EMI must be assessed within: 1) 3 months of submission of proper and sufficiently informative documents; 2) where not all documents have been submitted or have been submitted with deficiencies, within 3 months of submission of the documents and information required additionally by the Supervision Service.
Initial meeting with representatives of the Bank of Lithuania
The Bank of Lithuania, knowing that the legal acts regulating the authorisation process may not always be clear for both newcomers to the financial sector and experienced specialists, encourages applicants for a licence of an EMI to contact the Bank of Lithuania at an early stage. The Bank will provide more detailed information about the authorisation process and the requirements for prospective (existing) EMIs.
The representatives of firms who participated in pre-application meetings with representatives of the Bank of Lithuania more than once emphasised the benefits of such meetings, as they not only helped get the answers to the questions that arose, but also enter into a direct contact with specialists of the Bank of Lithuania. The aim of the initial meeting is to answer any questions that might have arisen in the pre-application stage and find out what licensed financial services the applicant is planning to provide or what type of licence it should seek. The attendees of such meetings typically include at least two specialists from the Supervision Service of the Bank of Lithuania (who typically answer questions about the authorisation process); however, any other, e.g. technical specialists may be required to attend as well.
During the pre-application meeting, the Bank of Lithuania aims at discussing the following:
- Who the applicant is and what kind of entity it will be?
- Who are the owners and/or major capital investors and what is their country of origin?
- How advanced or developed is the applicant’s proposition? In some cases it may be too early to have a meeting.
- Is the applicant part of a larger group?
- Who will be responsible for running the business?
- The applicant’s funding model.
- Details of the products/services, target markets, delivery channels, pricing policy, and the corresponding regulated activities that will be applied for.
- The EMI’s funding sources.
- Anticipated staffing levels.
- Key outsourcing arrangements.
It is our view that the process works well if the above information is provided to us in the form of a presentation ahead of the first meeting. We therefore urge prospective applicants to answer all the above questions before the anticipated meeting, i.e. to check whether all necessary information has been collected to be able to talk in detail in this regard and also to be prepared to be challenged on any aspects of their plans.
EMI licence fee
Prior to applying for an EMI licence it is necessary to pay into the account of the State Tax Inspectorate (STI) a state levy for the granting of the EMI licence, which currently is EUR 1,463 (the sizes of levies are established by Resolution No 1458 of the Government of the Republic of Lithuania of 15 December 20001). The EMI licence to engage in restricted activities is currently subject to a smaller levy (EUR 1,235).
The procedure for the generation of online banking orders to the income collection accounts of the STI and the numbers of the income collection accounts are available on the STI website.
1 – Available only in Lithuanian.
Key requirements for an EMI being established or authorised
Taking into account that, at the time of authorisation, the EMI being established or authorised must be prepared to comply with all requirements set for it, as an EMI in operation, the Bank of Lithuania requests that detailed data is submitted already at the time of application. Nevertheless, when assessing the critical aspects that may determine the authorisation of an EMI, the following basic elements can be singled out:
- fitness of submitted documents: the documents submitted must comply with the requirements of the legal acts regulating EMI activities and their supervision; all correct data established in legal acts or requested additionally must be submitted;
- compliance with the minimum capital requirement for EMIs: according to the provisions of the Republic of Lithuania Law on Electronic Money and Electronic Money Institutions, an EMI must possess a minimum initial capital of no less than EUR 350,000 and an EMI engaged in restricted activities is not subject to this requirement. The preceding 6 months’ average outstanding electronic money of the EMI to which a payment institution licence for restricted activities has been issued (where no activities are carried out, projected in a business plan) may not exceed EUR 900,000 per month, with the exception of the case specified in paragraph 7 of Article 12 of the Law. On exceeding this limit, the institution must, within 30 days of this fact coming to light, apply to the Bank of Lithuania for granting an EMI licence for unrestricted activities;
- fitness and propriety of the EMI and its shareholders or holders of voting rights: entities with a qualifying holding in the EMI’s authorised capital and/or voting rights must be able to ensure sound and prudent management of the EMI, have sufficiently high repute and be financially sound (the licence of an EMI to engage in restricted activities is not subject to the requirements for the fitness and propriety of shareholders or holders of voting rights);
- fitness and propriety of heads of an electronic money institution: the heads of an electronic money institution must be of good repute and possess the qualification and experience necessary to properly perform their duties.
- the operating plan must correspond to the possibilities of the EMI’s founders (shareholders or holders of voting rights) to implement it, while the prospective EMI must, at the time of authorisation, be prepared to provide financial services in a safe and sound manner.
It should be noted that, given the need to ensure sound and prudent management of the EMI, the EMI must have a detailed procedure for the management of electronic money issuance activity, adequate to the nature, scope and complexity of the EMI’s activities, including an organisational structure allowing to ensure the differentiation of functions and vertical as well as horizontal responsibilities with clearly defined, transparent and consistent limits of responsibility, a system for the identification, management, monitoring of risk which arose or may arise, a management information and internal control system, including reliable administrative measures and an accounting system.
Assessment of submitted documents
The process usually involves verification and assessment by a number of specialists from the Supervision Service and other structural units to assist in the formation of a common opinion and in reaching a decision about the application. During the assessment period, the following also takes place:
- regular communication and meetings with representatives of the applicant firm (when required);
- submission of comments by the Supervision Service, according to which the EMI must eliminate established material deficiencies. Upon request of additional information or data, the decision must be taken within 3 months (for an EMI licence to engage in restricted activities - within 2 months) of the receipt of the additional documents and data.
The duration and level of scrutiny of documents is subject to the amount of activities the applicant plans to undertake, specified in the operating plan. Where the application is requested not for all services that can be provided under the EMI licence, the scope of provided data should be smaller; hence, the assessment could be faster.
All applicants for an EMI licence have direct access to Bank of Lithuania specialists, who are experts in assessing submitted documents. We are on hand to take applicants through the authorisation process, inform about the progress of the process, and aim to ensure a cooperation-based relationship between the Bank of Lithuania and financial market participants during both the authorisation process and after it.
Documents and information to be submitted to the Bank of Lithuania in order to be granted a licence of an EMI
In order to receive an EMI licence, the company must submit to the Bank of Lithuania an application form and documents specified therein (Annex 1 to the Rules on the Licensing of Electronic Money and Payment Institutions).
Documents and information to be submitted to the Bank of Lithuania in order to be granted an EMI licence to engage in restricted activities
In order to receive an EMI licence to engage in restricted activities, the company must submit to the Bank of Lithuania an application form and documents specified therein (Annex 3 to the Rules on the Licensing of Electronic Money and Payment Institutions).
Laws and legal acts regulating the activities and authorisation of EMI
- Republic of Lithuania Law on Financial Institutions2;
- Republic of Lithuania Law on Companies3;
- Republic of Lithuania Law on Electronic Money Institutions (235 KB ) (unofficial translation)4;
- Law of the Republic of Lithuania on Payments (330 KB ) (unofficial translation)5;
- Law of the Republic of Lithuania on the Prevention of Money Laundering and Terrorist Financing (173.2 KB )6;
- Resolution No 58 of the Board of the Bank of Lithuania of 6 May 2004 on the approval of the General Regulations on the Submission and Examination of the Applications for Authorisations of the Financial Market Participants Supervised by the Bank of Lithuania and on the Granting of the Authorisations (62 KB );
- Resolution No 03-100 of the Board of the Bank of Lithuania “On the Amendment of 24 December 2009 Resolution No 238 of the Board of the Bank of Lithuania “On Granting Authorizations of the Bank of Lithuania to Electronic Money and Payment Institutions” (156.6 KB );
- Resolution No 246 of the Board of the Bank of Lithuania of 30 December 2009 on the Regulations on Keeping the Public Register of Payment Institutions (64.5 KB )7;
- Resolution No 03-138 of the Board of the Bank of Lithuania of 12 September 2017 on the Approval of the Rules for the Submission of the Notification of the Acquisition and Disposal of a Qualifying Holding of the Capital and/or of the Voting Rights in Financial Market Participants Under Supervision of the Bank of Lithuania (89.3 KB );
- Resolution No 03-43 of the Board of the Bank of Lithuania of 28 March 2014 on the Inspection Regulations for the Financial Market Participants Supervised by the Bank of Lithuania (63.9 KB );
- Resolution No 03-181 of the Board of the Bank of Lithuania of 14 November 2013 on approval of the Guidelines on the Assessment of Members of the Management Body and Key Function Holders of the Financial Market Participants Supervised by the Bank of Lithuania (93.1 KB )8;
- Resolution No 247 of the Board of the Bank of Lithuania of 30 December 2009 on Requirements for electronic money and payment institutions concerning internal control, risk management and protection of received funds (101.5 KB );
- Resolution No 03-83 of the Board of the Bank of Lithuania of 24 May 2018 on the approval of the regulations for the calculation of initial capital and own funds of electronic money institutions and payment institutions and the forms of the report on the calculation of initial capital and own funds of electronic money institutions (payment institutions) (73.5 KB ). Report forms can be downloaded here (34.8 KB );
- Other legal acts.
2 – Lithuanian consolidated version valid as of 1 March–30 June 2017. English version last amended on 12 March 2015.
3 – Lithuanian consolidated version valid as of 1 November 2016. English version last amended on 14 October 2014.
4 – Lithuanian consolidated version valid as of 1 August 2018. English version last amended on 20 August 2018.
5 – Lithuanian consolidated version valid as of 1 August 2018. English version last amended on 20 August 2018.
6 –Lithuanian consolidated version valid as of 1 December 2016. English version last amended on 17 January 2008.
7 – Lithuanian consolidated version valid as of 7 March 2012. English version last amended on 24 December 2009.
8 – Lithuanian consolidated version valid as of 23 November 2018. English version last amended on 7 January 2019.