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
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.