The Dutch Central Bank has announced that it will enforce stricter capital requirements compliance by payment institutions and electronic money institutions. The announcement follows indications that some of these institutions fall short of the capital requirements imposed by the Dutch Financial Markets Supervision Act (Wft). To avoid enforcement measures and disclosure of penalties or fines, payment institutions and electronic money institutions should carefully map and monitor their capital requirements and provide additional capital if necessary.
The specific capital requirements that the Dutch Central Bank (DNB) is targeting are the requirements on minimum own funds and solvency.
If a payment institution or electronic money institutions, for which DNB is the prudential supervisor, does not comply with either or both of these requirements, DNB will use the following tools from its enforcement toolkit:
- Orders subject to penalty: if the institution does not remedy the capital shortage within the time specified by DNB, it will automatically incur one or more penalties up to a previously specified maximum amount;
- Fines: if a payment institution or electronic money institution fails to comply with the capital requirements twice during a 25-month period, DNB will impose a fine. This fine can be imposed on either the institution or its de facto managers. Depending on the type, severity and duration of the breach and the culpability of the institution, this fine can amount to a maximum of 7.5 million euros. This amount can be doubled if an institution is fined repeatedly for the same breach within a five-year period.
DNB has stated that it can impose an order subject to a penalty and a fine for the same breach, and that it can take additional enforcement measures in case of repeated or structural breaches of the capital requirements. Also, DNB points out that in some instances it is obliged by law to disclose the imposed orders or fines.
To avoid enforcement measures and disclosure of orders subject to penalty or fines, payment institutions and electronic money institutions should carefully map and monitor their capital requirements and provide additional capital if necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.