Many payment service providers receive funds from payment service users. These so-called third-party funds are for executing payment orders and are receivables from the payment service provider.
Without appropriate measures, third-party funds end up in a payment service provider’s own account and thus, in case of insolvency, in the bankruptcy estate. The payment service user then runs the risk of missing out in the event of the payment service provider’s insolvency. For this reason, Article 3:29a in the Financial Supervision Act (Wft) requires payment institutions to secure third-party funds.
Prior to the amendment, there were two ways of securing third-party funds in the Netherlands:
- by means of an insurance policy or similar guarantee from an insurer or credit institution, or
- through an account in the name of a foundation for third-party funds.
The second option is currently the most common in the Netherlands. However, internationally, a foundation third-party funds is not common, so its use quite often raises questions.
With the introduction of the ‘ring-fenced account’ in Section 3:29aa of the Wft, there is an alternative to avoid such issues. Internationally, the option to secure third-party funds is known as the ring-fenced account. Securing by using a ring-fenced account implies that funds are held in an account exclusively for this purpose. By using such an account, the assets remain separated from the bankruptcy estate, even in the event of the payment institution’s bankruptcy.
For a ring-fenced account, a payment service provider can simply go to the bank where it already banks. It is possible to open several segregated capital accounts. This can be useful, for instance, for managing accounts separately per customer, per currency or per bank to mitigate (concentration) risks and keep the administration orderly.
On 6 July, the legislator published the decree establishing that holding the segregated assets account will be legal from 1 July 2022. The amendment is part of the Financial Markets Amendment Act 2022.