Short Definition:
Reconciliation is the process of checking that two sets of financial records — typically a firm's internal accounts and an external source such as a bank statement — match, and investigating any discrepancy until it's explained.
Full Explanation:
For UK payments and e-money firms, reconciliation isn't just good bookkeeping practice — it's a specific regulatory obligation. Under the FCA's safeguarding regime for payments and e-money firms, which came into force on 7 May 2026, firms must run both internal reconciliations (checking that the funds they should be safeguarding match the funds they're actually holding) and external reconciliations (checking those figures against bank and custodian records), with the frequency and rigour of the process scaled to the firm's risk profile. Firms are required to perform safeguarding reconciliations at least once each day, other than weekends, public holidays, and days when relevant foreign markets are closed, and larger e-money institutions running multiple fund pools may need to reconcile several times a day. This turns reconciliation from an accounting hygiene task into a compliance control that regulators actively supervise. Global Regulation Tomorrow
In Practice:
An e-money firm's finance lead runs a daily reconciliation between the ledger showing customer balances and the actual funds held in the safeguarding account; a mismatch of even a few pounds has to be traced and resolved before it can be signed off, because an unexplained gap is treated as a safeguarding shortfall, not a rounding error.
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Source Link:
FCA Policy Statement PS25/12 — Changes to the safeguarding regime for payments and e-money firms: https://www.fca.org.uk/publications/policy-statements/ps25-12-changes-safeguarding-regime-payments-e-money-firms
Last Reviewed:
20260801
