What does proportionality mean for EMIs under the Consumer Duty?

Proportionality refers to the FCA's shift toward a rebalancing of risk, where Electronic Money Institutions are encouraged to apply rules based on their specific size and complexity. Rather than following a one-size-fits-all approach, the way a Small EMI (SEMI) applies the Consumer Duty should be fundamentally different from the processes used by an Authorized EMI (AEMI). This approach helps firms avoid unnecessary complexity while still achieving the core outcomes required by the regulator.

How is the FCA changing its approach to risk for Electronic Money Institutions?

The FCA is signaling a move toward a rebalancing of risk, moving away from simple box-ticking exercises toward assessing actual impact. The regulator has noted that some firms are applying the Consumer Duty too intensively, particularly in wholesale markets and complex chains. By encouraging EMIs to challenge their own approaches, the FCA aims to reduce gold-plating and ensure that compliance efforts add genuine value rather than just creating hundreds of pages of technical assessments.

What is the difference between AEMI and SEMI compliance requirements?

The distinction between an Authorized EMI (AEMI) and a Small EMI (SEMI) is critical when it comes to the Consumer Duty. Because the landscape has shifted toward proportionality, the FCA expects the intensity of implementation to match the firm's specific profile. While an AEMI might have more complex chains to manage, a SEMI is expected to apply the rules in a way that is appropriate for its smaller scale, ensuring that compliance is not unnecessarily expensive or complex.

Why is the FCA concerned about intensive application of the Consumer Duty?

The FCA has observed that some firms are applying the Duty more intensively than intended, which often leads to unnecessarily complex and expensive processes for C-suite executives and Board members. The regulator is now encouraging firms to strip away this gold-plating. Instead of producing massive Board packs filled with technical assessments that offer little value, EMI leaders are being asked to focus on the actual impact of their services and the core outcomes of the Duty.

Consumer Duty for EMIs: Proportionality and FCA Risk Rebalancing

20 min

Explore how Electronic Money Institutions (EMIs) are navigating the FCA's shift toward proportionality and risk rebalancing under the Consumer Duty framework.

Consumer Duty for EMIs: Proportionality and FCA Risk Rebalancing

How This Personalized Podcast Was Made

This podcast was created using BeFreed's AI, based on selected books, the creator's learning goals, and their preferred tone.

CP26/23: Consumer Duty – scope and proportionality

https://www.fca.org.uk/publication/consultation/cp26-23.pdf

Input question

Deliver a senior-level, authoritative consultative audio lesson for Boards, CXOs, and SMF holders of UK Electronic Money Institutions (EMIs), focusing on the differential application of the FCA Consumer Duty between SEMIs and AEMIs. Use the 15 attached sources as the primary regulatory foundation. Key themes: 1) Proportionality under PRIN 2A for SEMIs vs. full outcome obligations for AEMIs. 2) The impact of Consultation Paper CP26/23 on scope and distribution chain clarity. 3) The interaction between Consumer Duty outcomes and mandatory safeguarding under EMRs/PSRs. 4) GRC governance requirements including the annual Board report, the role of the Consumer Duty Champion, and outcome-focused MI. Ensure specific focus on manufacturer/distributor roles in agent-led models and the treatment of vulnerable customers under FG21/1. Preserve all provided implementation deadlines and the practitioner-focused, outcome-oriented tone.

Podcast Style

Lena

Lena

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