The EML Payments Ltd (ASX: EML) share price is having a difficult start to the week.
In morning trade, the payments company's shares are down 22% to 92.5 cents.
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Why is the EML share price crashing?
Investors have been selling down the EML share price on Monday following the release of the company's update on its dealings with the Central Bank of Ireland.
With the assistance of external expert advisors, EML's European business, PFS Card Services, has been undertaking a remediation programme at the direction of Central Bank of Ireland since July 2021. This covers its entire operations in Europe.
According to today's update, despite the significant work PFS Card Services has undertaken, the Central Bank of Ireland is still not satisfied with its remediation programme. It notes that the bank has identified "shortcomings" in components of the programme, principally the sequencing and approach taken to the risk assessment of its distributors, corporates and customers.
What now?
PFS Card Services will now adopt a revised approach to these components, which it warns may result in additional controls being embedded into the internal control framework. It is anticipated that the adjustments to the remediation programme will result in assurance being finalised in 2023.
In addition, EML will continue to operate with a material growth limitation over its total payment volumes while this remediation work is undertaken. These limitations are due to expire in December but this latest development could impact this.
EML's new managing director and CEO, Emma Shand, and the board are actively engaging with the Central Bank of Ireland.
It's not all bad news out of Europe, though. One positive is that the European Central Bank's decision to raise the cash rate by 50 basis points last week is expected to immediately benefit EML's European business by approximately $4 million on an annualised basis. Management also highlights that a favourable interest rate environment is expected to partially offset the elevated cost base in Europe due to the remediation programme.
