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Alternative for professional indemnity insurance

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Question:

What is meant by a "comparable guarantee" as an alternative to professional indemnity insurance, referred to in Article 5(2) of PSD2?

Published: 20 April 2018

Answer:

A comparable guarantee, as referred to in Section 5(2) of PSD2, can at any rate be understood to mean:

  1. a guarantee, comparable to the insurance referred to in Article 5(2) of PSD2, from a bank that does not belong to the same group as the payment institution, to the amount of the insurance and calculated in accordance with the provisions of the EBA Guidelines on the criteria on how to stipulate the minimum monetary amount of the professional indemnity insurance or other comparable guarantee pursuant to Article 5(4) of Directive (EU) 2015/2366 - EBA/GL/2017/08; or
  2. an amount of own funds that is equivalent to the insurance, as meant in item 1 above, or a combination of an amount of own funds and the insurance as meant under item 1 above, where EUR 1 in own funds may be equated to an insurance amount of EUR 20.

Explanation

The option of providing a bank guarantee comparable to the insurance is in accordance with the protection requirements pertaining to funds received by a payment institution from payment service users or other payment institutions (Article 40a of the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels Wft – Bpr) and funds received by an electronic money institution in exchange for electronic money (Article 40b of the Bpr).

The option of maintaining an amount of own funds that is equivalent to the insurance, or a combination of an amount of own funds and the insurance, where EUR 1 in own funds may be equated to an insurance amount of EUR 20, is in accordance with the calculation of minimum own funds or a combination with a professional indemnity insurance for investment firms under Articles 48(2) and 48(3) of the Bpr. The amount of own funds is composed as mentioned in Article 26 (1) of the Capital Requirement Regulation.

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