GAO Report Assesses Regulatory Oversight of Fintech Activities in US
The U.S. GAO published a report that assesses the regulatory oversight in the fintech landscape in the United States and offers recommendations for improvement. In written comments on a draft of this report, the agencies stated that they concurred with the GAO recommendations and would take responsive steps. GAO made recommendations for improving inter-agency coordination on fintech, addressing competing concerns on financial account aggregation, and evaluating whether it would be feasible and beneficial to adopt regulatory approaches similar to those undertaken by regulators in jurisdictions outside of the United States.
The GAO report assessed fintech benefits, risks, and protections for users; regulatory oversight of fintech firms; regulatory challenges for fintech firms; and the steps taken by domestic regulators and regulators in other countries to encourage financial innovation. The report concludes that fintech products pose similar risks as traditional products, but their risks may not always be sufficiently addressed by existing laws and regulations. It was also noted that fintech activities create data security and privacy concerns and could potentially impact the overall financial stability as fintech grows. The extent to which fintech firms are subject to federal oversight of their compliance with applicable laws varies. The U.S. regulatory structure poses challenges to fintech firms. With numerous regulators, fintech firms noted that identifying the applicable laws and how their activities will be regulated can be difficult. Although regulators have issued some guidance, fintech payment and lending firms say complying with fragmented state requirements is costly and time-consuming. Given their mandated consumer protection missions, regulators could act collaboratively to better ensure that consumers avoid financial harm and continue to benefit from these services.
In the report, GAO identified leading practices for inter-agency collaboration, including defining agency roles and responsibilities and defining outcomes. Implementing these practices could increase the effectiveness of regulatory efforts to help resolve this conflict. Regulators abroad have taken various approaches to encourage fintech innovation; these include establishing innovation offices to help fintech firms understand applicable regulations and foster regulatory interactions. Some use regulatory sandboxes that allow fintech firms to offer products on a limited scale and provide valuable knowledge about products and risks to both firms and regulators. Regulators abroad have also established various mechanisms to coordinate with other agencies on financial innovation. While some U.S. regulators have taken similar steps, others have not, due to the concerns related to favoring certain competitors or perceived lack of authority. While these constraints may limit regulator ability to take such steps, considering these approaches could result in better interactions between U.S. regulators and fintech firms and help regulators increase their understanding of fintech products. This would be consistent with the GAO framework calling for regulatory systems to be flexible and forward-looking to help regulators adapt to market innovations.
Related Links
Keywords: Americas, US, Banking, Securities, Fintech, Regulatory Oversight, GAO
Previous Article
EC Adopts Rules on Investments in STS Securitizations for InsurersRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
