National Bank of Belgium Exemption Policy under Article 105 of the Law of 21 December 2009 (Electronic Money)

NBB_2015_11 – 2 March 2015 Circular – Page 1/4 boulevard de Berlaimont 14 – BE-1000 Brussels tel. +32 2 221 38 12 – fax + 32 2 221 31 04 company number: 0203.201.340 RPM Brussels www.bnb.be

Circular
Brussels, 2 March 2015
Reference: NBB_2015_11 your contact:
Kurt Van Raemdonck tel. +32 2 221 53 39 – fax +32 2 221 31 04 kurt.vanraemdonck@nbb.be

National Bank’s exemption policy based on Article 105 of the Law of 21 December 2009 (electronic money)

Scope
Legal entities exempted based on Article 105 of the Law of 21 December 2009 concerning the status of payment service institutions and electronic money institutions, access to the activity of payment service providers, the activity of issuing electronic money, and access to payment systems (hereinafter “the Law”).

Summary/Objectives
This circular aims to clarify the framework governing the National Bank of Belgium’s (hereinafter “the Bank”) exemption policy based on Article 105 of the Law.

Structure

1. Submission of an exemption file
2. Scope of the exemption
3. Consequences of the exemption
4. Role of the approved auditor

Madam, Sir,

Based on Article 105 of the Law, legal entities issuing electronic money may be exempted from the application of all or part of the provisions of Book 3 of the Law and its implementing decrees.

Under Article 105 of the Law, the exemption may indeed be granted to legal entities:
1° whose commercial activities as a whole generate an average of electronic money in circulation not exceeding 5,000,000 euros; and 2° whose persons responsible for management or the exercise of the activity have not been convicted of offenses related to money laundering, terrorist financing, or those referred to in Article 20, § 1, 1°, 2°, and 3° of the Banking Law.

Circular – Page 2/4 NBB_2015_11 – 2 March 2015

This circular aims to clarify the framework governing the Bank’s exemption policy based on Article 105 of the Law.

1. Submission of the exemption file
   The following information must be provided by the applicant to enable the NBB to form an opinion on the applicant and verify that the two legal conditions for exemption are met:
   1) a program of envisaged activities;
   2) a business plan, including a financial plan for the first three financial years;
   3) proof that the applicant has the required initial capital (cf. infra, point 2. “Scope of the exemption”, second bullet);
   4) a description of measures for the protection of funds received in exchange for the issued electronic money;
   5) a description of the internal control mechanisms adopted to comply with the obligations set out in Regulation (EC) No 1781/2006 1 and the Law of 11 January 1993;
   6) a description of the applicant’s organizational structure;
   7) the identity of the shareholders;
   8) the identity of the persons participating in the administration or management of the applicant, as well as persons who participate in the effective management of the electronic money issuance activity, and, where applicable, payment services;
   9) the identity of the auditor(s);
   10) the legal form and statutes of the applicant;
   11) the address of the applicant’s registered office.

2. Scope of the exemption
   Subject to acceptance of the exemption file, the Bank grants an exemption from all provisions of Book 3 of the Law, with the following exceptions:

• Article 65, which requires that the exempted legal entity be constituted as a commercial company, with the exception of the private limited liability company (SPRL/SRL) constituted by a single person;
• Article 68, §§ 1 and 3, which concern the requirements of professional integrity and adequate expertise. Exempted legal entities are required to comply with Circular NBB_2013_02 in this regard. This circular specifies how the Bank proceeds with “fit & proper” assessments, regarding both the content and the process of the assessments;
• Article 71bis, which concerns the information obligation that exempted legal entities must respect towards the Bank in the context of “fit & proper” assessments, as well as the Bank’s prior approval in case of appointment. The circular mentioned in the previous point also applies;
• Article 72, § 2, which concerns the solvency requirements to be respected by the exempted legal entity 2. The provisions of the Bank’s Regulation of 18 June 2013 apply only on condition that the articles of the Law referenced by said regulation are applicable to exempted legal entities. Thus, the own funds mentioned in Article 5 of said regulation must, for exempted legal entities, amount to at least 2% of the average electronic money in circulation 3. When an exempted legal entity has not completed a sufficient period of activity, this requirement is assessed based on the estimate of the electronic money in circulation resulting from its business plan;
• Article 77, relating to the exercise of activities other than the issuance of electronic money, where applicable subject to the Bank’s prior authorization;
• Article 78, which imposes on the exempted legal entity the obligation to take measures to protect the funds received from holders of electronic money in exchange for the issued electronic money;
• Title 2, Chapter 1, Sections 4 and 5 (Articles 81 to 90), which concern control and exceptional measures and sanctions regarding exempted legal entities.

By way of derogation from Article 84 of the Law, insofar as it declares applicable Article 28, paragraph 1, of the Law, the exempted legal entity that primarily exercises commercial activities unrelated to the issuance of electronic money may, subject to the Bank’s prior approval, entrust the functions of auditor to one or more auditors who have not been approved for this purpose by the Bank in accordance with Article 222 of the Banking Law 4. This auditor is required to comply with the obligations imposed by the Law and by this circular on the approved auditor (cf. in particular infra, point 4. “Role of the approved auditor”).

3. Consequences of the exemption
   Exempted legal entities are listed on a list maintained for this purpose by the NBB. The website indicates that these legal entities are exempted.

Furthermore, Article 105, § 3, of the Law provides that legal entities:
1° have their registered office in Belgium, and effectively exercise their electronic money issuance activities on Belgian territory; 2° do not benefit from the mutual recognition regime provided for by Article 91 of the Law (no European passport); 3° must provide, in the contract governing the issuance of electronic money, that the amount charged on the electronic medium storing the electronic money cannot exceed 150 euros; 4° cannot provide payment services unrelated to electronic money unless the conditions set out in Article 48 are met (exemption regarding payment services); 5° inform the NBB of any change in their situation affecting the conditions set out in § 1, and periodically report to the NBB the average electronic money in circulation; 6° apply the provisions of the Law of 11 January 1993 concerning the prevention of the use of the financial system for money laundering and terrorist financing that are applicable to electronic money institutions, and the decrees and regulations adopted for its implementation.

Periodic reports to be submitted by exempted legal entities Regarding point 5° above, the legal entity reports every six months to the NBB the average electronic money in circulation.

3 Article 5 of the Regulation of 18 June 2013 refers to Article 66 of the Law, which sets the minimum initial capital at 350,000 euros. Article 66 does not, however, apply to exempted legal entities.

4 In its assessment, the Bank will take into account in particular the degree of specialization of the respective activities and the risks associated with them, as well as the relative importance of the electronic money activity in the balance sheet and the income statement.

NBB_2015_11 – 2 March 2015 Circular – Page 3/4

In order to meet the statistical requirements of the European Central Bank (ECB), exempted legal entities must also annually communicate to the NBB their total balance sheet at the end of the financial year, as well as the electronic money in circulation on the same date.

The above reports must be made by sending an Excel file through the application made available for this purpose by the Bank. The data must be communicated to the NBB no later than the first business day of the second calendar month following the end of the financial year. The (semi-annual) report regarding the average electronic money in circulation is repeated on the first business day of the second calendar month following the six calendar months covered by said report.

Regarding point 6° above, the exempted legal entity is required to complete annually the abbreviated periodic questionnaire regarding the fight against money laundering and terrorist financing, in accordance with the procedures specified in Circular NBB_2014_12 5.

Furthermore, persons responsible for effective management are required, in accordance with Article 78, § 6, paragraph 3, of the Law, to submit annually a report to the Bank, inter alia, on the measures taken in execution of Article 78, §§ 1 and 2, of the Law, in order to protect the funds received in exchange for electronic money, via the application made available for this purpose by the Bank.

4. Role of the approved auditor
   Based on Article 84 of the Law, the exempted legal entity must appoint an auditor approved by the NBB. 6

The approved auditor must comply with its legal obligations regarding control, insofar as they are applicable based on the NBB’s exemption policy 7.

In addition to its usual mission of verifying annual accounts, it must also, pursuant to Article 85, 5°, of the Law, report at least once a year to the NBB on the adequacy of the measures taken by the exempted legal entity to preserve the funds received from holders of electronic money, in application of Article 78, §§ 1 and 2.

Finally, the NBB additionally requires that the approved auditor declare every six months that the average electronic money in circulation of the exempted legal entity does not exceed the ceiling of 5,000,000 euros. This is intended to guarantee the accuracy and authenticity of the exempted legal entity’s declaration regarding non-exceedance of this ceiling.

A copy of this circular is sent to the auditor(s), reviewer(s) (approved), of the exempted legal entity.

I have the honor to be, Madam, Sir, the expression of my distinguished sentiments.

Mathias Dewatripont
Vice-Governor

5 Circular NBB_2014_12 of 22 October 2014 concerning the abbreviated periodic questionnaire regarding the fight against money laundering and terrorist financing.
6 Cf. nevertheless supra, point 2. “Scope of the exemption”, fifth bullet, for the exception to this principle.
7 It should not, for example, evaluate internal control measures, given the exemption provided for in Article 69 of the Law, which imposes adequate internal control.