Overview
Issue
Regulators typically require e-money issuers to meet initial and ongoing minimum capital requirements to protect the firm against unexpected losses and serve as a source of growth.
- Initial requirements aim to ensure that new entrants have sufficient capital to build a sustainable e-money business and mitigate key risks such as unexpected losses.
- Ongoing requirements aim to ensure that the e-money issuer retains a sufficient capital buffer as the business grows.
Minimum Capital requirements for EMIs & Similar Entities
| Country | Initial requirements | Ongoing requirements |
|---|---|---|
| India | USD 13.5 million (PBs) USD 675,000 (Non-bank PPI Issuers) |
USD 2 million (achieved by the end of the third financial year after authorization) for non-bank PPI issuers |
| Mexico | USD 164,130 | |
| Nigeria | USD 5 million (MMOs) USD 12.5 million (PSBs) | Not specified (MMOs) 10% of risk-weighted assets (PSBs) |
| Bangladesh | USD 5.3 million | USD 5.3 million, rising to USD 10.6 million (to be built up over time from retained earnings) |
| Congo, DR | USD 2.5 million | Greater of
|
| Colombia | USD 2.3 million | 2% of 30-day average outstanding electronic deposits |
| Myanmar | USD 1.8 million | Not specified |
| Philippines | USD 2 million | Not specified |
| Malaysia | USD 1.2 million | Greater of
|
| Ghana | USD 3.5 million | USD 3.5 million |
| Sri Lanka | USD 750,000 | Not specified |
| Peru | USD 744,000 | 2% of outstanding e-money liabilities |
| Brazil | USD 371,000 | Greater of
|
| WAEMU | USD 540,000 | Greater of
|
| EU | USD 414,000 | 2% of outstanding e-money liabilities |
| Tanzania | USD 216,000 | USD 216,000 |
| Kenya | USD 182,000 | USD 182,000 |
| Namibia | USD 101,500 | Average of outstanding e-money liabilities, calculated over the previous 6 months. |
| Rwanda | USD 200,000 | USD 200,000 |
Average exchange rates for 2021 are used. Initial requirements in local currency are as follows: India: INR 1 billion (PBs), INR 150 million (Nonbank PPI Issuers); Mexico: UDIs 500,000 = 3,329,414 MXN; Nigeria: NGN 2 billion (MMOs), NGN 5 billion (PSBs); Bangladesh: BDT 450 million, rising to BDT 900 million over time; Congo, DR: Congolese Franc equivalent of USD 2.5 million; Myanmar: MMK 3 billion; Colombia: COP 7.63 billion as of 2020 (adjusts with inflation); Philippines: PHP 100 million; Ghana: GHS 20 million; Malaysia: MYR 5 million; Sri Lanka: LKR 150 million; Peru: PEN 2.9 million; Brazil: BRL 2 million; West African Economic & Monetary Union (WAEMU): XOF 300 million; European Union (EU): EUR 350,000; Tanzania: TZS 500 million; Kenya: KES 20 million; Namibia: NAD 1.5 million; Rwanda: RWF 200 million.
Considerations
Initial Requirements
Initial minimum capital requirements vary widely from country to country. When setting these requirements, regulators may wish to consider the following:
- How much capital is needed to build the required infrastructure for sustainable e-money business and demonstrate an e-money issuers financial capacity and commitment?
- Are capital requirements sufficient to enable the EMI to cover unexpected losses?
In practice, initial minimum capital requirements may vary significantly depending upon, e.g.,
- The size of the addressable market.
- Core infrastructure costs in a particular country.
Ongoing Requirements
Requiring e-money issuers to maintain the initial minimum capital in unimpaired form could serve as a base ongoing capital requirement. In addition, tying the capital base to outstanding e-money liabilities could help to ensure that sufficient capital is available as the EMI grows.
Regulators could consider requiring e-money issuers to maintain the greater of
- The initial minimum capital.
- a percentage of outstanding e-money liabilities (several countries have set this percentage in the 2-3% range). However, the adequacy of these requirements has not been extensively tested in practice.
ONGOING REQUIREMENTS:
1) Basing an ongoing capital requirement on a percentage of outstanding e-money liabilities works better than a % of risk-based assets, as in most countries, e-money issuers are required to keep 100% of their deposit liabilities in very low-risk assets that typically carry a 0% rating.
2) As we lack significant e-money loss history, additional research may be necessary to validate the adequacy of an ongoing requirement of 2-3% of outstanding e-money liabilities.
