EBA Focuses on Fintech
The European Banking Authority said one of its key areas of focus for this year will be fintech and the EU regulator will issue a discussion paper setting out a strategic approach.
The EBA said in the 2016 Annual Report that it will follow up on the work done in previous years on crowdfunding, virtual currencies, innovative uses of consumer data and automation in financial advice. The regulator said fintech can be an important driver to expand access to financial services for consumers, investors and firms but also also raise challenges for consumer protection and the fight to financial crime.
“In so doing, the EBA had to make difficult trade-offs between competing demands, such as mitigating the risks while still allowing market participants to harness the benefits of the innovation,” said the report.
This year the EBA said it will continue analysing fintech and will issue a discussion paper setting out the strategic approach on authorisation and registration regimes; prudential and operational risks to credit institutions, payment institutions and electronic money institutions; impacts on business models of credit institutions, payment institutions and electronic money institutions; and consumer protection and retail conduct of business issues.
“In general, we never jumped the gun suggesting a new wave of regulations for innovative products and their providers,” said the EBA. “Financial regulation should not be a tool for protecting incumbents from competition. But we have also identified areas in which the regulatory framework needs to adapt.”
Last week the FCA provided an update on its regulatory sandbox and listed the firms that were successful to begin testing in the second phase. The sandbox was launched in 2014 to allow businesses to test innovative products, services, business models and delivery mechanisms in a live environment while ensuring that consumers are appropriately protected.
The FCA received 77 submissions for the second phase of the regulatory sandbox, more than in the first phase, and 24 are ready to begin testing shortly.
“The range of firms testing in the second cohort is diverse, covering a variety of geographies and sectors including wholesale, general insurance, payments, retail banking and retail lending,” said the FCA. “Accepted propositions from firms cover a range of ideas including distributed ledger technology based payment services and artificial intelligence software to observe client behaviour and better determine client preferences before financial advice is given.”
In the first phase of the FCA sandbox, 24 firms were accepted out of 69 applications and 18 firms had testing plans approved in October 2016. The six month testing window has closed and firms are submitting final reports, which will be reviewed before the firms transition out of the sandbox. The regulator said it currently expects most firms to take forward their propositions to market.
Firms can apply to be part of the third sandbox phase until 31 July 2017 and should be ready to begin testing from November 2017.
Christopher Woolard, executive director of strategy and competition at the FCA, said in a statement: “The sandbox continues to grow in popularity and it is particularly encouraging that both the number of firms applying and accepted for testing has increased in cohort two. That means more innovative firms, trialling more innovative propositions to bring to the market.”
Trade repository data has been used for the estimate for the first time.
Full testing will allow firms to decide whether to become SIs.
Two agreements provide certainty and minimise regulatory arbitrage.
The rules make it easier for businesses to raise money on capital markets.
Issuance can be consolidated at one CSD rather than across separate countries.