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
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.