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Fintech EML Payments (ASX: EML) has flagged material impacts to its European business as the Central Bank of Ireland (CBI) looks to limit its subsidiary's pre-paid card programs - a move that sent shares falling by 11 per cent this morning, shaving more than $152 million off the Brisbane-based company's capital value.
The group's Irish-based subsidiary PFS Card Services (Ireland) Limited (PCSIL), which accounts for more than a quarter of EML's global revenue, was scrutinised by the regulator in May over its governance, compliance, control frameworks and other matters.
That announcement cut $800 million from EML's market capitalisation and prompted Shine Justice (ASX: SHJ) to investigate a possible class action over EML's handling of disclosures of the CBI correspondence.
It was an initial shock that sent EML shares from almost $6 a piece to $2.47 each. They have recovered somewhat since then, but an announcement about further correspondence revealed after the market closed yesterday led to fresh jitters from investors this morning.
EML explained the latest announcement related to potential directions including but not limited to its remediation plan and material growth.
"The nature of those potential directions is more limited than those originally foreshadowed by the CBI in May 2021," the company stated.
"However, as presently framed, EML considers that the directions could materially impact the European operations of the Prepaid Financial Services business."
The CBI has advised that the EML subsidiary's proposed material growth policy is higher than it would like to see.
"In addition, the CBI has proposed that certain limits be applied to programs that, if implemented, could have a negative impact on the PCSIL business," the company reported.
"EML notes that, subject to endorsement from the PCSIL Board, it is due to present to the CBI a significant and detailed analysis of limits applied across almost 27,000 programs in the next week along with a proposed recalibration of limits for certain programs."
The EML subsidiary plans to provide the Central Bank of Ireland with submissions in relation to the potential directions by 28 October 2021.
"The CBI and PCSIL are in ongoing dialogue regarding the concerns raised by CBI and PCSIL’s remediation plan. The remediation plan remains on track," EML stated, reiterating that the matter does not concern its Australian or North American businesses, Sentenial Limited PFS' UK subsidiary, or the group's French-regulated subsidiary Nuapay SAS.
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