New Safeguarding Rules Published

The FCA has published its new safeguarding rules (PS25/12, 7th August 2025). These rules follow on from the consultation paper CP25/20 published last September. 

In the original consultation ‘Interim rules’ (now referred to as the Supplementary Regime) looked to enhance and support the existing legislative safeguarding provisions in the Electronic Money Regulations 2011 (EMRs) and Payment Services Regulations 2017 (PSRs). 

‘End-state rules’ (now referred to as the Post-Repeal Regime) would replace the safeguarding requirements of the EMRs and PSRs with a ‘CASS’ style regime, where relevant funds and assets would be held on trust for consumers.  

Having received feedback from the industry the FCA has now firmed up its stance. 

Summary

The proposals put forward under the Supplementary Regime are, at first sight, pretty much as originally consulted upon although among other things we note that there is now a threshold of £100,000 of relevant funds, under which payments firms will not be required to arrange a safeguarding audit. 

Also, the FCA have increased the implementation period of these rules from six to nine months (although it could be argued that the original six-month proposal may have underestimated the time firms would need to comply).  

However, and interestingly, based on the feedback received, the Post-Repeal rules have effectively have been deferred.   

The FCA has says it will wait until a full audit period has been completed, after the Supplementary Regime has come into force, and review the implementation and success of these before consulting again. This time on whether further proposals or changes are necessary. 

In other words, the proposals related to imposing a statutory trust and receiving relevant funds directly into a designated safeguarding bank account are not being implemented pending further consideration and assessment of the effectiveness of the Supplementary Regime. 

Supplementary Regime 

• Perform safeguarding reconciliations at least once each day, other than weekends, public holidays (or when relevant foreign markets are not open). 

 • Maintain a resolution pack, including requirements for the types of documents and records to be included that would help achieve a timely return of relevant funds to customers should the payments firm enter an insolvency procedure.  

• Require certain authorised payment institutions and electronic money institutions to arrange annual audits of their safeguarding compliance, carried out by a qualified auditor.  

• The requirement for payments firms to submit a new monthly regulatory return to the FCA relating to their safeguarding arrangements.  

• Carry out due diligence when appointing or periodically reviewing third parties that manage or hold relevant funds or assets.  

• Continue to be able to invest relevant funds in the same range of secure, liquid assets as they can now.  

• Ensure there are no conditions or restrictions on safeguarding insurance policies and comparable guarantees paying out, other than certification of the occurrence of an insolvency event.  

• Should have a contingency plan at least 3 months before a safeguarding insurance policy or comparable guarantee expires. (If they do not have a replacement or renewal in place, they must be ready to safeguard relevant funds through the segregation method.)  

• Payments firms hold funds received in exchange for issued e-money or to execute a payment transaction safely and securely, at all times, or make sure they are covered by an appropriate insurance policy or comparable guarantee. 

 • The right amount of funds is segregated from the payment firm’s own funds.

 • The claims of e-money holders or payment service users can be met from the safeguarded asset pool.  

• Relevant funds can be returned to customers as quickly and fully as possible if a payments firm fails or decides to wind down and exit the market. 

The Supplementary Regime, and related amendments to the Approach Document, will come into force on 7 May 2026.  

Conclusion

In our view this is very much a case of the “Good, the Bad and the Ugly”.   

There is, to be fair, much to like about the supplementary regime. For example, it makes eminent sense to tighten guidance around weekend and holiday reconciliation (an area which was notoriously unclear); a resolution pack is very much to be welcomed (and we would suggest that for well run firms this isn’t a big ask – as the FCA says the content of a resolution pack relates to information that one would expect payments firms to maintain in the ordinary course of business); and, the requirement not to have a safeguarding audit if a firm holds less than £100,000 of relevant funds is sensible and proportionate. It is also heartening that the option to use insurance or invest funds remains more or less as is. 

On the other hand, the decision to defer consideration of the post-repeal options to a later stage  pending a further review might be seen as a possible indication that further industry feedback was needed to assess the full implications of the final state proposal in the CP – certainly in terms of its impact on the industry.   

While the delay may be welcome to some we can’t help thinking that this merely creates more uncertainty.  We said in our article responding to the original CP that the direction of travel appears to be towards a CASS style regime and we have no reason to resile from that opinion – even if the speed of the journey may be slower than envisaged. 

In terms of the “ugly”, then the decision to restrict safeguarding audits to qualified auditors alone rather than, say, issue standard guidance on what an audit should look like and allow a range of options, is disappointing and which may raise concerns among some firms.. It will also in our view add considerable cost  (financial and operational) to firms’ compliance overall whatever the FCA may say. 

There is clearly a lot to digest over the coming weeks and months. 

We will put out more thoughts on the new regime once the dust settles but in the meantime should you have any queries please get in touch. 

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