2026-05-11T18:27:09+00
What small-EMI status means for safeguarding
The prudential and operational requirements that apply to small EMIs, and the consumer-facing implications.
The small-EMI regime is a reduced authorisation category for institutions whose total business activities generate average outstanding e-money below EUR 5 million. The reduced prudential requirements do not, however, reduce the substantive consumer protections.
Safeguarding requirement
The statutory obligation to safeguard relevant funds is identical between ordinary and small EMIs. Funds received from e-money holders must be either held in a separately designated account with an authorised credit institution, or covered by an equivalent insurance policy or comparable guarantee. The mechanics are prescribed by EMD2 and the implementing rules of each competent authority.
Insurance and guarantee alternatives
Small EMIs more frequently rely on the insurance or guarantee alternative to a safeguarded bank account, on the basis that operational scale does not always justify the cost of dedicated banking arrangements. The competent authority approves the specific alternative on initial authorisation; subsequent changes require notification.
What safeguarding does not do
Safeguarded funds remain claims on the EMI. They are not deposits. They are not covered by any deposit guarantee scheme. In the event of EMI insolvency, safeguarded funds are returned to e-money holders through the insolvency process; the process is generally faster than a deposit-guarantee payout, but the legal basis is different and the protections are not equivalent.
Activity restrictions
A small EMI may not exercise EEA passporting rights. Its activities are confined to the home jurisdiction. A small EMI also has a structural ceiling on the average outstanding e-money it may generate; growth past EUR 5 million obliges it to apply for ordinary-EMI status, at which point the full prudential regime engages.
Disclosure to consumers
The small-EMI status of the institution must be disclosed in pre-contract information and consumer-facing terms. The disclosure is required to be sufficient for the consumer to understand the implications - principally, the absence of EEA passporting and the consequent limitation to home-state services. The substantive consumer protections under the EMD2 framework apply in full.