Article 5(4) of the European Union's updated Payment Services Directive (PSD2) commands the European Banking Authority to issue guidelines about minimum monetary amounts of professional indemnity insurance (PII) for payment initiation services and account information services. It has now done so.

Its guidelines are addressed to the EU's national regulators and are quite strict. The EBA has analysed market practices in the European Union with regard to the provision of payment initiation services and account information services and applicable insurance policies. Now that the findings are in, the EBA has elaborated on the criteria and indicators set out in PSD2; identified additional indicators; developed a calculation method for the indicators; established a formula for the calculation of the minimum monetary amount of the PII or comparable guarantee; and consulted interested parties about its proposals (it did this last between September and December).

Some firms supported these guidelines, but some were not happy with the calculation of some indicators, the EBA's idea of 'proportionality' and some terminology.

The EBA weighed up these arguments and made some changes, adding specifications for the scope of the PII and comparable guarantee and redrafting guideline 1 to include details about PII and comparable guarantees. It deleted such indicators as ‘geographical location’ and ‘number of contracts’ under the risk profile criterion in guideline 5. It changed the name of the ‘value of claims’ indicator to ‘value of requests for refunds’ and changed its wording also. To deal with the very high coverage amount that the formula might produce for undertakings, the EBA has reduced the percentages to be applied to the top tier in the calculation of the indicators under guidelines 5 and 7. It has also added details to do with 'engagement' in other business with regard to the type of activity criterion in Guideline 6, to clarify how this is to be taken into account for the purpose of calculating the minimum monetary amount of the PII or comparable guarantee.

The guidelines, in outline, are as follows.

• Guideline 1: Professional indemnity insurance and comparable guarantee - regulator should consider these two things mutually exclusive and require undertakings that apply for authorisation or registration to hold either the PII or the comparable guarantee.
• Guideline 2: Criteria and indicators.
• Guideline 3: Formula (to calculate the minimum monetary amount of the PII or comparable guarantee to be held by undertakings).
• Guideline 4: Publication (regulators should make the criteria, the indicators and the formula public).
• Guideline 5: Calculation of risk profile criterion.
• Guideline 6: Calculation of type of activity criterion.
• Guideline 7: Calculation of size of activity criterion.
• Guideline 8: Comparable guarantee criterion (regulators should require undertakings to hold either the PII or a comparable guarantee).
• Guideline 9: Review - regulators ought to force undertakings to review, and if necessary recalculate, the minimum monetary amount of their PII or comparable guarantee at least annually.

The guidelines will come into force on 13 January, the date on which PSD2 must take effect in national laws everywhere.