3 June 2008
We received a petition asking:
"We the undersigned petition the Prime Minister to Enforce UK Banking Regulations For UK Paypal Customers."
Details of Petition:
"Increasing numbers of UK Citizens experience problems whilst using Paypal UK, combine this with the fact that Paypal is: a) no longer regulated by the FSA b) duly licensed as a Luxembourg credit institution (ie. a bank) This petition requests that UK Banking Regulations are enforced for all UK Paypal Customers.
Read the Government’s response
The decision of PayPal (Europe) to relocate to Luxembourg was a commercial decision taken by the firm.
PayPal (Europe) is licensed as a credit institution in Luxembourg under the Luxembourg laws that implement the banking consolidation directive , and is under the prudential supervision of the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (the "CSSF").
PayPal (Europe) is able to operate in the UK by exercising cross border "passporting rights". These are rights, provided for by the banking consolidation directive, for a firm to establish a branch or provide services in an EEA (European Economic Area) State other than that in which its head office is situated. The rights are given effect to by the Financial Services and Markets Act 2000 ("FSMA") which provides that a passporting firm will qualify for authorisation, and thus have permission to carry out regulated activities, in the UK provided that it meets certain conditions. For example, the FSA must have received a notice from the incoming firm’s home state regulator (in the case of Paypal (Europe), the CSSF) that it has given the firm consent to establish a branch or provide services in the UK.
The FSA, as the "host state regulator", does have a role in regulating incoming passporting firms, such as Paypal (Europe), for compliance with UK legislation and FSA rules which implement the provisions of the banking consolidation directive.