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EU's banking watchdog to publish guidelines for fintech regulation
The European Banking Authority (EBA) is preparing new guidelines with the aim to create a more competitive and innovative European fintech sector. The guidelines will include recommendations for the core design of a “sandbox” and innovation hub, Elisabeth Noble, a policy expert at EBA told Reuters.
A sandbox is a controlled environment set up by a regulator that allows fintech startups and other innovators to conduct live experiments under a regulator’s supervision.
The UK was one of the first countries in the world to introduce a fintech sandbox, helping London become a major fintech hub. The model has since been emulated by a number of other countries, including Australia, Canada, and Singapore, in addition to the state of Arizona in the US. In the EU, Denmark and the Netherlands, have launched sandbox schemes to enable fintech businesses to test new technologies and business models on customers in a safe environment.
Innovation hubs are platforms where regulated or unregulated firms get support, advice or guidance in navigating the regulatory framework or identifying supervisory, policy or legal issues and concerns.
There are already 16 innovation hubs or forums across the EU.
“Our report in December will include an analysis comparing the existing sandboxes and innovation hubs, and recommendations for the core design of a sandbox and innovation hub,” Noble told the news agency in a briefing.
“We hope this report will lead to a common and more coordinated approach, to help with cross-border scaling up of fintech firms, which needs sandboxes and innovation hubs working together,” she added.
Noble specified that the EBA recommendations will allow some space for adaptation to national markets.
Earlier this year, the European Commission published a 2018 Fintech Action Plan. The 23-step Action Plan aims to promote the digital transformation of the financial services sector, including the establishment of an EU Fintech Laboratory, the creation of a best-practices blueprint for regulatory sandboxes and substantial crowdfunding reforms.
Last month, the UK’s Financial Conduct Authority (FCA) announced that it has, in collaboration with 11 other financial regulators and related organisations, including the Monetary Authority of Singapore and the Hong Kong Monetary Authority, created the Global Financial Innovation Network (GFIN) to provide a more efficient way for innovative firms operating in multiple jurisdictions to interact with regulators.
The establishment of the GFIN follows an initial consultation on the idea of a ‘global sandbox’ in February 2018. Fifty responses were received to this consultation and overall feedback was positive.
The initial membership of the GFIN consists of: 1. Abu Dhabi Global Market, 2. Autorité des marchés financiers of Quebec, Canada, 3. Australian Securities & Investments Commission, 4. Central Bank of Bahrain, 5. U.S. Bureau of Consumer Financial Protection, 6. Dubai Financial Services Authority, 7. Guernsey Financial Services Commission, 8. Hong Kong Monetary Authority, 9. Monetary Authority of Singapore, 10. Ontario Securities Commission of Canada and 11. The Consultative Group to Assist the Poor (an arm of the World Bank Group).