UK Finance response to PESAR Review

Linklaters was pleased to work alongside Osborne Clarke LLP on UK Finance’s submission to the independent review of PESAR, the Payment and Electronic Money Special Administration Regime. The submission makes recommendations to support on PESAR’s central statutory objective: to ensure the prompt return of customer funds on insolvency.

PESAR Review

The Payment and Electronic Money Institution Insolvency Regulations 2021 provide a special administration regime for non-bank payment firms. The regime is modelled in part on the Investment Bank Special Administration Regime (IBSAR). It aims to overcome delays that can impact customer access to funds when payment firms fail. 

HM Treasury committed to reviewing PESAR within five years of its introduction and in December 2024 launched an independent review led by Adam Plainer. The review seeks to determine whether PESAR is delivering on its objectives and whether the regulations should be modified.

UK Finance response

Although the review did not require a formal public consultation, stakeholders were invited to provide evidence. UK Finance submitted several recommendations for reform including:

1. A distinct approach for payment firms: There are fundamental operational differences between electronic money institutions or authorised payment institutions and investment banks. UK Finance calls for a regime more tailored to the business models and customer profiles of EMIs/APIs – rather than closely mirroring the IBSAR – where greater regulatory divergence would achieve better outcomes.
2. Enabling continuity of trading: The objective of returning funds to customers does not support continuity of trading. UK Finance argues that, where funding is available to support it, continuity of trading could allow customers to continue accessing services and facilitate a transfer of business to a third party. 
3. Accelerating fund returns and supporting administrators: Simplifying the requirements for distribution plans and enabling interim distributions could reduce delays in returning customer funds. UK Finance also supports improved record-keeping requirements, as proposed by the FCA, and more flexible approaches to reconciliations.
4. Narrower application: Firms that do not hold or operate payment accounts, such as account information or payment initiation service providers, could be excluded from PESAR.

Next steps

HM Treasury has requested an interim update on the review by September 2025, with the final report expected by the end of the year.