Why has the EML (ASX: EML) share price tumbled 17% in 2 weeks?

More questions than answers arise from EML's regulatory correspondence…

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The EML Payments Ltd (ASX: EML) share price has hit a rough patch over the past couple of weeks.

Ahead of the market open, shares in the payments company are sitting at $3.04 apiece. This means the company's shares have eroded 17.2% in the past 2 weeks. In contrast, the S&P/ASX 200 Index (ASX: XJO) has outperformed the ASX-listed company with a gain of 1.8% across the same period.

What's been going on with the EML Payments share price?

It has been a challenging time for the EML share price recently. This follows the company disclosing further correspondence between its Irish-based subsidiary, PFS Card Services (PCSIL), and the Central Bank of Ireland (CBI).

As previously covered, on 7 October EML revealed additional details on potential directions that CBI might want to take in addressing the regulatory concerns present at PCSIL. These potential directions could add to the existing costs associated with the remediation plan and/or dampen future growth prospects.

Regarding the potential growth limitations, EML stated:

Whilst acknowledging the remediation program currently underway and governance improvements with the PCSIL Board, the CBI has advised that PCSIL's proposed material growth policy, as requested and approved by the PCSIL Board, is higher than what the CBI would want to see.

At this stage, the PCSIL board is expected to present a detailed analysis of limits applied across 27,000 programs to the CBI. This analysis will be used as a basis for the proposed recalibration of limits for certain programs. However, investors are currently none the wiser on how successful this presentation might be. Hence, the uncertainty has manifested itself as increased volatility in the EML share price.

Additionally, the company intends on submitting further information to CBI regarding the potential directions by 28 October 2021.

Thankfully, any operational impacts will be contained to the company's European operations. Meanwhile, EML's Australian, North American, and United Kingdom operations will remain unaffected.

What's the current damage?

The initial correspondence with the CBI was initiated on 14 May 2021. Since then, EML Payments has been occupied with instigating remediation plans to address some of the regulatory concerns highlighted.

In its FY21 full-year result, the payments company specified $11.4 million in costs incurred in relation to professional advisory, remediation, and other potential costs associated with CBI's regulatory worries.

The latest EML share price weakness likely stems from the unknown of what the true final costs could amount to. As a result, shareholders are treading carefully until more information is disclosed to the market.

Motley Fool contributor Mitchell Lawler owns shares of EML Payments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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