Select Committee on European Communities Seventeenth Report


Letter from Lord Tordoff, Chairman of the Committee, to Patricia Hewitt MP, Economic Secretary, HM Treasury

  At its meeting on 15 December, Sub-Committee A (Economic and Financial Affairs, Trade and External Relations) considered the Commission's proposal for two Directives relating to electronic money institutions, together with your Explanatory Memorandum of 30 October.

  You say: "The Directive has been drafted with the intention of providing a balance between the need to protect the funds of consumers and the need to minimise barriers to entry, so as to allow development of industry". You also mention that the Treasury is "in contact with interested parties, including existing and potential future issuers of E-Money". We should be glad to know whether the consultation includes representatives of consumers, and how you intend to satisfy yourself that the correct balance has been struck between protecting consumers and minimising barriers to entry. We should also like to be assured that the needs of the blind and visually handicapped are being considered. In the meanwhile, we are holding this document under scrutiny.

15 December 1998

Letter from Patricia Hewitt MP, Economic Secretary, HM Treasury, to Lord Tordoff, Chairman of the Committee

  Thank you for your letter of 15 December. I am sorry that the Christmas break has delayed a response.

  You asked about two areas. The first was striking the right balance between protecting consumers and minimising barriers to entry. I believe this is a key issue for negotiation of this draft proposal.

  Although the possibility remains that the electronic money industry could develop through a major bank, or non-bank, company launching a sizeable scheme, which operated cross border, and issued significant sums, in total, the more likely scenario, at the moment, is the development of a number of small schemes. These might be limited to, for example, university campuses, or—as is already happening in other Member States—football clubs or holiday resorts. Where such schemes are geographically limited, and the funds at stake small, it is important that the prudential rules are not so onerous as to make them unviable.

  So, in discussions in Brussels, my officials have been seeking to shift the focus of the Directive onto this level. One area they have been examining is the waiver in Article 7. We believe that consumers would be best protected by focusing on the maximum amount allowed on each card, rather than on the total size of the scheme. If electronic money is to become a substitute for cash—and if cards are to be readily rechargeable—then there is no need for a high limit on each card.

  My officials are in contact with the Consumers Association and will, of course, take account of their views in negotiating this proposal.

  You also asked about the consideration being given to the needs of the blind and visually handicapped. This is, of course, a key issue, but not one which we see being addressed through a prudential Directive. We have, however, raised it with some potential issuers, who all recognise the importance of a satisfactory solution.

  In general, discussions in Brussels have served to emphasise the differences in approaches by Member States rather than any moving towards greater agreement. So it is possible that the proposal will change significantly over the coming months. I will, of course, keep you in touch with developments.

28 January 1999

Letter from Lord Tordoff, Chairman of the Committee, to Patricia Hewitt MP, Economic Secretary, HM Treasury

  Thank you for your letter of 28 January responding to our two queries on this proposal. We can see that you are taking pains to protect the needs of consumers, and we are glad to hear that you are considering the needs of the blind and visually impaired. In the light of your reply we have now cleared this document from scrutiny.

23 February 1999

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