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ID 1047. Own funds calculated in accordance with method C
relevant indicator Back

Relevant provisions
Article 8(1)(C) of Directive 2007/64/EC

Question
Dear colleagues,

I would be grateful if you could please express your opinion on the clarification what income should be taken into account in the case of a hybrid payment institution which hold own funds calculated in accordance with Method C?
Does it mean that only income that is related to payment services should be taken into account?


Answer
The indicator provided for in Article 8(1) of the Directive, point (a) of method C, is the sum of the interest income, the interest expenses, commissions and fees received, as well as other operating income, whether positive or negative. In this regard, the indicator calculation may not include income from extraordinary or irregular items. Further details are provided in Article 8(1) under the paragraph dealing with method C (a). 
 
Such items should relate to payments services only. If not, the own funds requirement would become excessive and discriminatory. For example in a large hybrid payment institution with only relatively small payments services, if Method C were applied to the all the interest income, interest expenses, commissions and fees received by the whole hybrid payment institution, the own funds requirement would be very large in relation to the business volume in respect of payment services. On the other hand, a stand alone payment institution with exactly the same business would only be subject to the own funds requirement calculated by using the corresponding items for the same payments business. We also draw attention to Article 15(3) which requires payment institutions provide separate accounting information for payment services.




Date
Submitted on 24/05/2011