Getting ready for CENTROlink's new safeguarding requirements

In August 2024, the Bank of Lithuania’s SEPA gateway CENTROlink announced that its payment institution (PI) and electronic money institution EMI) customers must comply with new safeguarding requirements by April 2025.

This blog breaks down these changes and their causes, the consequences for CENTROlink’s customers, and how to comply on time.

CENTROlink’s new safeguarding requirements

Any payment or electronic money institution licenced in the EU must safeguard customer funds.

The most common safeguarding method is to keep customer funds in a segregated safeguarding account held at a credit institution.

When onboarding with CENTROlink, PIs and EMIs open two types of accounts at the Bank of Lithuania:

• Account(s) of customer funds: accounts credited or debited when the PI or EMI sends or receives SCT and SDD (FC account) or SCT Inst (FC Inst account) on behalf of their customers. Such accounts are commonly named settlement accounts.

• Account of own funds (FC2): account that holds financial collateral to secure the fulfilment of obligations related to the services provided by the Bank of Lithuani and liabilities to the Bank of Lithuania.

Until their August announcement, the Bank of Lithuania considered that PIs / EMIs could use FC accounts to safeguard their customer funds in compliance with EU regulations. 

Article III.13: From the moment of its opening, the account(s) of customer funds is dedicated only for holding and managing the funds received by [PI or EMI]. [...] The [PI o EMI]’s customer funds are held in the payment system in full compliance with the requirements of Article 10 of Directive (EU) 2015/2366 of the European Parliament [...]

Article 10 of Directive (EU) 2015/2366 is PSD2’s article on safeguarding requirements.

In August 2024, the Bank of Lithuania announced that this would no longer be the case and would no longer provide PIs and EMIs with dedicated safeguarding accounts starting from April 2025. 

This change will significantly impact CENTROLink’s PI and EMI customers by forcing them to safeguard their funds in third-party credit institutions.

The impacts for payment and electronic money institutions

Most PIs / EMIs access payment schemes and safeguard customer funds with the same banks. Properly managing the safeguarding of customer funds with settlement and safeguarding accounts in the same bank can already be tricky. Doing so across different banks is even more complex.

Onboarding with a new partner bank

CENTROlink’s customers will need to safeguard their customer funds with a third-party commercial bank. While many banks now partner with PIs and EMIs and offer them access to payment schemes, settlement accounts and safeguarding accounts, partnering for safeguarding accounts only is not a common model.

Therefore, entering into commercial discussions, undergoing the banks’ compliance process and finalising contractual discussions on time for April 2025 shouldn’t be overlooked.

Integrating with the partner bank

Once an agreement is reached with a partner bank, the PI or EMI has to build an integration between its core systems and the bank’s cash management systems to automate safeguarding workflows.

Even for companies that have already built one or several bank integrations, building a new one is always a challenging project. The usual steps involve:

• Getting the right interlocutor and obtaining the documentation

• Choosing the right bank connectivity options, including connectivity channel, security options, payment and account report features, and file format

• Developing, testing, and validating the integration

Building the proper safeguarding workflows between the Bank of Lithuania and the partner bank

1. Funds attribution.

Any credit or debit on the Bank of Lithuania settlement account must be attributed to specific customers so that the PI or EMI can update individual customer balances accordingly and know at all times how much funds each customer holds with the PI or EMI.

This step is not new, as CENTROlink’s customers must already do so in their current safeguarding setup on the Bank of Lithuania’s FC accounts.

2. Safeguarding transfers.

The European regulation mandates that if a customer receives a payment, and the funds corresponding to that payment are not withdrawn by the customer or used to send another payment, the PI or EMI must safeguard these funds “by the end of the next business day.”

This means that CENTROlink’s customers will need to transfer the right amount of funds from their Bank of Lithuania’s FC accounts to their partner bank safeguarding account every day and properly track and reconcile these payments to ensure the proper tracking of individual customers’ funds at any given time.

3. Liquidity management.

As safeguarded funds are held on a different account than the settlement account, or FC accounts in CENTROlink’s case, all customer deposits are not instantly available on the FC account to settle outgoing SCT or SCT Inst or incoming SDD.

These accounts being held at two different partner banks can make the problem even more complex as the transfer between the safeguarding and settlement accounts can take some time.

Automating the liquidity management of the settlement accounts is, therefore, critical. There are several levels of automation possible, from triggering automated cash sweeps from the safeguarding account to the settlement accounts whenever the settlement accounts balances reach a given minimum value to calculating automated cash sweep amounts based on customers' booked payment orders and current settlement accounts balances, to adding learnings from historical data to the computation.

How Numeral can support CENTROlink’s customers to comply on time

Numeral supports European PIs and EMIs with their safeguarding workflows.

Numeral provides fully-managed bank connectivity to a growing network of more than 30 partner banks across Europe through a single, modern API, enabling fast, future-proof integration with the partner bank of your choice.

Our network includes CENTROlink and leading commercial banks with offers tailored to APIs and EMIs, such as BNP Paribas, Natixis GTB, LHV, Banking Circle, and ClearBank.

On top of this managed connectivity, Numeral provides a payments hub enabling customers to automate safeguarding workflows through API, webhooks, and a modern dashboard, including:

• Accessing Bank of Lithuania and partner bank’s accounts balances and transactions in real-time

• Automating payments between the Bank of Lithuania’s settlement accounts and partner bank’s safeguarding account

• Automating attribution of transactions to individual customers

• Automating reconciliation of payments with transactions on Bank of Lithuania’s and partner bank’s accounts

We would be happy to discuss your safeguarding plans. Contact us with any questions.