European Parliament published a briefing that outlines the current and upcoming fintech-related laws at the EU level. It follows on from a March 2017 EPRS briefing that focused, inter alia, on the evolution, scope, and economic prospects of fintech. The report covers regulatory activities toward the implementation of the fintech-related plans of the European regulatory authorities, including the areas of payments services, consumer and data protection, insurtech, virtual currencies, and supervision of regulatory sandboxes.
Twenty-one EU member states and three European Economic Area countries currently have innovation hubs, while only five member states (Denmark, Lithuania, the Netherlands, Poland, and the UK) have fully operational regulatory sandboxes. Based on a report from ESAs, EC is expected to present a report with best practices for regulatory sandboxes in the first quarter of 2019. EC is also monitoring the development of crypto-assets and initial coin offerings with the ESAs. Based on an assessment of risks, opportunities, and the suitability of the applicable regulatory framework, EC will assess whether regulatory action at the EU level is required. Regarding payment services, EC (along with market players) is aiming to develop, by mid-2019, standardized application programming interfaces that are compliant with the PSD II and the GDPR as a basis for a European open banking eco-system, covering payment and other accounts.
The report also mentions that, following up on an EC report from June 2017, in December 2017, European legislators agreed to extend the scope of the Anti-money-laundering Directive to virtual currency exchanges and wallet providers. Member states must bring the laws, regulations, and administrative provisions necessary to comply with this directive into force by January 10, 2020. Overall, the report states that, in EU, attention is being paid to the contribution that fintech could make to increasing efficiency, strengthening financial integration, and enhancing the role of EU in financial services. The report emphasizes the pressing need for safe and effective common rules supporting innovation and protecting consumers. Indeed, in EU, areas remain where member states can choose to apply individualized or less strict rules at national level (for example, peer-to-peer lending and virtual currencies). This can result in a fragmented environment, which may prevent businesses from expanding across borders. It can also lead to an uneven playing field and arbitrage opportunities that incentivize companies to obtain permits in less restrictive jurisdictions in an effort to minimize red tape while operating internationally.
The financial technology, or fintech, sector encompasses firms that use technology-based systems, either to provide financial services and products directly or to make the financial system more efficient. Fintech is a rapidly growing sector: in the first half of 2018, investment in fintech companies in Europe alone reached USD 26 billion. The fintech sector brings rewards including innovation and job creation, but also challenges, such as data and consumer protection issues, and the risk of exacerbating financial volatility or cybercrime. To tackle these multi-disciplinary challenges, policy- and lawmakers in EU have adopted and announced several initiatives, for instance, on intra-EU payment services, data protection, crowdfunding, and regulatory sandboxes.
Keywords: Europe, EU, Banking, Regtech, Fintech, Regulatory Sandbox, Insurtech, Virtual Currencies, European Parliament
Previous ArticleFSB Publishes Its Work Program for 2019
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
BoE updated the known issues document for the statistical reporting Forms AS and FV.
FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.
SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.
BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.
OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.
EBA updated the report on the implementation of selected COVID-19 policies.
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.