Benoît Cœuré of ECB spoke about the two-way interaction between financial regulation and financial technology (fintech) during his introductory remarks at a roundtable organized by FinLeap in Berlin. He said: “It is not just that change in the financial sector will impact the way we do regulation. Regulatory initiatives will also affect the direction and speed of transformation in the financial sector … .” He also highlighted the emergence of Berlin as the fintech capital of Europe.
Mr. Cœuré discussed the implications of fintech in the area of payments and settlement systems and cyber security. He mentioned that “… it is fair to say that the regulatory approach here in Europe has generally been supportive. It is built on the assumption that opening up market access to fintech companies will help increase competition, lower charges and spur innovation, as we have seen happen in other network industries.” The recently published fintech action plan of EC is a “testimony to the EU’s positive attitude toward innovation in the financial sector. It sets the stage for targeted initiatives to address diverging licensing requirements with a view to allowing fintech products and solutions to be rapidly rolled out across the EU and thereby benefit from the economies of scale of the Single Market.” The action plan also builds on previous significant initiatives, most notably the revision of Europe’s Payment Services Directive (PSD2), which has already been transposed in 11 EU member states. By giving bank customers the right to share their account information with third parties and use them to initiate payments, the Directive opens up a level playing field where fintechs can grow, gain scale, and leverage other parallel technical advances, some of them promoted and developed by ECB.
He added that ECB is investigating the potential of distributed ledger technologies (DLT) in the context of the real-time gross settlement (RTGS) system. ECB has developed a “Guide to the assessment of fintech bank license applications.” The guide is intended to make the process more transparent for potential fintech bank applicants and to increase their understanding of the procedure and criteria applied by ECB when assessing license applications. This initiative is part of a broader effort by ESAs to map current authorizing and licensing approaches by national authorities and the launch of so-called “fintech facilitators” in several member states. In the backdrop of growing cyberattacks, last week, ECB established the Euro Cyber Resilience Board for pan-European financial infrastructures to create a regular forum to enhance the cyber resilience of financial market infrastructures, their critical service providers, and the wider EU financial sector. Mr. Cœuré concluded that in case regulatory loopholes emerge, “we would need to close them to ensure that financial intermediation outside the banking sector remains safe and sound.”
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