FCA PS25/12 – Final Rules for Supplementary Safeguarding Regime

On 7 August 2025 the Financial Conduct Authority published its final rules, establishing a new interim safeguarding regime for payment and e-money institutions (PS25/12). This follows growing concerns over weaknesses in safeguarding practices, with these shortcomings resulting in delays and shortfalls in returning money to consumers, undermining trust in the sector. 

The need of reform is underscored by the growth in consumer use of e-money accounts. In 2024, e-money institutions safeguarded £24bn of funds more than double the £11bn held in 2021, increasing the potential widespread impact of harm if any firm failed and did not have sufficiently robust safeguarding practices. 

The FCA consulted on the proposed reforms last year (CP24/20) and there is a two-stage approach: 

• the 'Supplementary Regime' an interim framework aiming to strengthen compliance with existing legislation under the Electronic Money Regulations (EMRs) and Payment Services Regulations (PSRs), in the short term. 
• the 'Post-Repeal Regime' an overhaul of the safeguarding regime providing a long-term framework modelled on the Client Assets Sourcebook (CASS) where funds would be held on trust for consumers. This regime is contingent on repeal of the current safeguarding provisions. 

Supplementary Regime

The Supplementary Regime goes live on 7 May 2026 giving firms 9 months to prepare and implement the new requirements. 

The finalised Supplementary Regime remains largely consistent with the CP24/20 proposals, with minor amendments to improve proportionality for smaller firms in particular. The rules apply to all authorised payment institutions, authorised e-money institutions, small e-money institutions and credit unions which issue e-money in the UK. 

There are three core areas: 

1. Improved books and records
   • Daily safeguarding reconciliation is required now excluding weekends and public holidays.
   • Firms must maintain resolution packs detailing where funds are held, lists of agents and distributors and the firm's procedures for recording and managing relevant funds. 
2. Enhanced monitoring and reporting 
   • Firms must undergo annual audits of safeguarding compliance conducted by qualified auditors.
   • Monthly regulatory return to be submitted to the FCA outlining the firms safeguarding arrangements 
3. Strengthening safeguarding practices 
   • Firms must conduct due diligence when appointing third parties involved in safeguarding.
   • Safeguarding insurance policies must be free of restrictive conditions and firm must have contingency plans before such policies expire. 

Post-Repeal Regime 

Details of the Post-Repeal Regime are not yet confirmed as they will depend on repealing the existing safeguarding requirements under the Payments Services Regulations 2017 and the Electronic Money Regulations 2011. The FCA has indicated that they intend to carry out an audit once the Supplementary Regime has come into force and may consult on further proposals if any changes are considered necessary. 

Next steps 

As the Supplementary Regime goes live on 7 May 2026, firms need to begin planning for implementation considering the impact of the rules on internal processes (and engage with the FCA where necessary) to support implementation. 

We have extensive experience in helping payments and e-money firms navigate regulatory change.  If you would like to discuss how these new rules may impact your firm, please contact Martin Cook, Matt Jones  or Brandon Wong. You can meet our financial services experts here. 

Written by Beth Jewell and Matt Jones.