Independent review finds English payment and e-money insolvency framework needs reform

HM Treasury has published an Independent Review of the Payment and Electronic Money Institution Insolvency Regulations 2021 (PEMIIR), finding that the current insolvency framework is not fully delivering on its statutory objectives.

Background to PEMIIR

The PEMIIR were introduced to provide a swift, customer-focused insolvency framework for payment institutions and electronic money firms, aiming to balance the rapid return of customer funds with the ability to continue operating through financial distress.

Key findings

The review identified several critical issues with the current framework:

• No clear hierarchy among the three statutory objectives.
• Significant delays in returning funds to customers (often exceeding twelve months).
• Gaps in consumer protection as customers are not covered by the Financial Services Compensation Scheme (FSCS).
• Unnecessary delays caused by court approval requirements.

Recommended solutions

Rather than overhauling PEMIIR entirely, the review recommends targeted reforms including:

• Prioritising business rescue and customer fund transfers where appropriate.
• Introducing an out-of-court route into special administration to reduce costs and delays.
• Streamlining the approval process for distribution plans and interim distributions.
• Introducing FSCS-style protection for customers to enable prompt payouts and provide a robust safety net.

The government is now considering the review's recommendations and will likely consult on proposed legislative amendments in due course.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.