Dave Ramsden, the BoE Deputy Governor for Markets and Banking, spoke at the Bund Summit in Shanghai about the approach BoE has taken to fintech. While elaborating on the approach, he emphasized three dimensions of openness—being open to new ideas, being open to new businesses entering financial services, and being open to improving the operations. He explained that BoE is reviewing its data strategy to embrace new technology, exploring use of open banking to help small businesses harness the power of their data, looking to make the regulatory rulebook machine-readable, and deploying proof-of-concepts to see what potential benefits artificial intelligence or machine learning could have for identifying regulatory issues.
Mr. Ramsden highlighted that being open to new ideas and new ways of doing things is crucial for innovation. New approaches can improve the quality and inclusiveness of the financial services. However, this openness should not compromise the existing standards. Instead, it is necessary to weigh potential benefits to efficiency and resilience, against potential risks to financial stability. New general purpose technologies like artificial intelligence and machine learning hold the promise of increasing economic productivity and providing better products across the economy, including in financial services. To ensure that the risks and opportunities are balanced appropriately, BoE is researching machine-learning deployment. Throughout the work on artificial intelligence/machine learning the aim is to enable safe innovation. This is how BoE balances the competing demands of its primary objectives, which include ensuring financial stability and ensuring safety and soundness of firms, and its secondary objectives such as promoting competition.
He highlighted that in the UK a model of open banking has been pioneered, using Application Programming Interfaces (APIs) that allow consumers to have better control over their banking data. If the architecture and legal and technical safeguards can be built, users can have sight of, and control permissions for, every use of their data. BoE is exploring the possibility of applying this approach to help small businesses harness the power of their data, drawing on some positive aspects of China’s experience with real-time data. Next, he talked about the importance of BoE being open to changing the way it works. He highlighted that, to regulate the digital economy effectively, it is necessary to be equipped with appropriate digital tools. BoE wants to leverage modern technology so that the way it collects and analyzes data becomes cheaper, faster, and more effective. This would provide a foundation that is both more resilient and has lower barriers to entry; helping private sector innovation to flourish.
To achieve these goals, BoE is reviewing its data strategy to embrace new technology. Work has started on deployment of proof-of-concepts to see what potential benefits artificial intelligence or machine learning could have for identifying regulatory issues. BoE is also looking to make the regulatory rulebook machine-readable, providing a platform on which firms can develop innovative methods to ensure their compliance. Finally, Mr. Ramsden noted that it is important to leverage existing forums to promote global co-operation and co-ordination on technology issues. Global financial institutions for policy coordination (such as FSB, BIS, and IMF) provide important forums in which one can highlight concerns and work to find agreement where it exists. He mentioned that BoE wants to work with its international partners to ensure fintech is supported by international cooperation, rather than creating new dislocation.
Related Link: Speech
Keywords: Europe, UK, Banking, Fintech, Artificial Intelligence, Machine Learning, Open Banking, Reporting, Machine-Readable Regulations, BoE
Previous ArticleAPRA Updates Implementation Plan for New Data Collection System
CBUAE has issued a regulation that introduces the licensing and supervision framework for low-risk, specialized banks.
APRA is consulting on CPG 511—the draft Prudential Practice Guide on remuneration for banks, insurers, and superannuation licensees—with the comment period ending on July 23, 2021.
MAS announced a new RegTech grant scheme and an enhancement of the Digital Acceleration Grant (DAG) scheme to accelerate technology adoption in the financial sector.
PRA published a letter that sets out findings from the 2020 Internal Audit Review of the Collections function of a sample of non-systemic banks and building societies.
EIOPA launched a consultation on the Interbank Offered Rate (IBOR) transitions, in context of the EU Benchmarks Regulation.
EIOPA published a discussion paper on uses cases of, and the European approach to, blockchain and smart contracts in the insurance sector.
HKMA granted a banking license to NongHyup Bank (also NH Bank), which is incorporated in the Republic of Korea.
PRA published a discussion paper that explores options for developing a simpler but resilient prudential framework for banks and building societies that are neither systemically important nor internationally active.
ECB published an opinion on the proposal for a regulation on the pilot regime for market infrastructures based on distributed ledger technology.
EBA proposed regulatory technical standards that specify how to identify the appropriate risk-weights and conditions when assessing minimum loss given default (LGD) values for exposures secured by immovable property.