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Enforcement in the event of capital shortages for payment institutions or electronic money institutions
Published: 19 January 2017
DNB has found that a number of payment institutions and electronic money institutions under our supervision pursuant to the Financial Supervision Act (Wet op het financieel toezicht – Wft) have had a capital shortfall within the meaning of the Wft capital requirements.
Ensuring compliance with prudential requirements is essential for safeguarding a financial institution's financial soundness and a healthy financial sector as a whole. That is why we tightened our enforcement in the event of non-compliance with capital requirements effective from 1 January 2017.
This fact sheet lists the formal measures we may impose on payment institutions and electronic money institutions that are in non-compliance with the statutory capital requirements.
Capital requirements deficits
By non-compliance with the statutory capital requirements we mean a minimum required own funds deficit as referred to in the minimum own funds requirement (Section 3:53 of the Wft in conjunction with Section 48(1) of the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels Wft – Bpr)) and underruns of the minimum required own funds for the purposes of the solvency test as referred to in the solvency requirement (Section 3:57 of the Wft in conjunction with Section 59(1) of the Bpr).
Non-compliance with these prudential requirements is a serious breach of the Wft.
Pursuant to Sections 1:79 and 1:80 of the Wft in conjunction with the Decree on Administrative Fines in the Financial Sector (Besluit bestuurlijke boetes financiële sector – Bbbfs) DNB is authorised to impose an administrative fine, an order subject to penalty, or both, to payment institutions and electronic money institutions acting in non-compliance with these prudential requirements.
Stricter enforcement effective from 2017
Since 1 January 2017 DNBwe haves tightened our enforcement actions against payment institutions or electronic money institutions acting in non-compliance with the statutory capital requirements. We have the following enforcement instruments at our disposal.
Order subject to penalty
If we observe an underrun of the statutory capital requirements at a payment institution or electronic money institution, we may impose an order subject to penalty. If the institution fails to remedy the underrun within the compliance deadline we set, it forfeits one or more penalties up to a predetermined maximum by operation of law.
If a payment institution or electronic money institution fails to comply with the statutory capital requirements twice within a 25-month period, we may impose an administrative fine. Administrative fines may be imposed on an institution as well as on any of its de facto directors.
Pursuant to the Bbbfs, non-compliance with the statutory minimum own funds requirement or the solvency requirement carries a category 2 or 3 fine. In fine category 2, the base amount is EUR 500,000, with a maximum sum of EUR 1,000,000 and a minimum sum of EUR 0. In category 3, the base amount is EUR 2,500,000, with a maximum sum of EUR 5,000,000 and a minimum sum of EUR 0.
Pursuant to Section 2 of the Bbbfs, we may raise or lower the base amount of administrative fines in the second or third category by a maximum of 50%, taking into account the gravity and duration of the non-compliance, as well as the degree of attributability of the institution. Pursuant to Section 4(1) of the Bbbfs we are required to take into account the infringer's financial capacity in setting the amount of the fine. In the event of financial incapacity, the fine may be reduced by up to 100%. Pursuant to Section 3 of the Bbbfs, we may double the fine for repeated instances of non-compliance within a five-year period.
In some cases, we may impose an administrative fine as well as an order subject to penalty for one and the same instance of non-compliance.
If a payment institution or electronic money institution repeatedly or structurally acts in non-compliance with the statutory capital requirements, we may consider additional or alternative measures.
Pursuant to Sections 1:97-1:101 of the Wft, we are obliged in certain cases to disclose the decision to impose an administrative fine or order subject to penalty. Pursuant to Section 1:97(1) of the Wft, we must do so once it has become irrevocable. As soon as an institution forfeits a penalty, we must disclose our decision to impose the order subject to penalty as soon as possible pursuant to Section 1:97(4) of the Wft. In certain grave instances of non-compliance we must also disclose decisions to impose an administrative fine as soon as possible. The same applies to the outcomes of any appeals and further appeals made in connection with administrative sanctions. Sections 1:98, 1:99 and 1:101 of the Wft contain procedural provisions regarding public disclosure of administrative sanctions, such as the circumstances in which disclosure may be postponed or anonymised.
Different measures and deadlines apply for instances of non-compliance with other requirements, such as reporting requirements.
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