Featured Product

    ESMA Report Examines Licensing Regime for Fintech Firms in EU

    July 12, 2019

    ESMA published a report examining the status of licensing of fintech firms across EU. The report is based on two surveys conducted by ESMA since January 2018. The surveys gathered evidence from national competent authorities on the licensing regimes of fintech firms in their jurisdictions. Based on the evidence gathered, ESMA concludes that most innovative business models can operate within the existing EU rules and, therefore, it does not make additional recommendations for changes in EU regulation at this stage, in line with the EBA and EIOPA conclusions in their respective reports.

    The first survey, which was conducted in January 2018, sought to identify potential gaps and issues in the existing EU regulatory framework, assess how the existing national regimes diverge, and propose recommendations to adapt EU legislation to the emerging innovations. The second survey, which was launched in January 2019, attempted to identify the ways in which the national competent authorities employed the concepts of proportionality and flexibility when licensing fintech firms. The surveys confirmed that national competent authorities do not typically distinguish between fintech and traditional business models in their authorization and licensing activities since they authorize a financial activity and not a technology. The following are the key findings from the surveys:

    • The primary area where regulatory gaps and issues have been identified by national competent authorities and where fintech firms do not fit neatly within the existing rules is related to crypto-assets, initial coin offerings, and distributed ledger technology. National authorities called for more clarity at the EU level with respect to the definition of financial instruments and the legal nature of crypto-assets. The responses served to confirm the Crypto Asset Advice by ESMA, which specified that certain tokens are financial instruments and subject to the full attendant regulation, while those tokens that are not deemed financial instruments should be subject to some minimal level of regulation.
    • The surveys also identified the need for greater clarity on the governance and risk management processes associated with cyber-security and cloud outsourcing. The Joint ESA Advice on the need for legislative improvements related to Information and Communication Technology (ICT) risk management requirements in the EU financial sector and the Joint ESA Advice on the costs and benefits of a coherent cyber-resilience testing framework for significant market participants and infrastructures within the EU financial sector address many of these issues.
    • There exist a direct link and interdependencies between the innovation facilitators and authorizing approaches for innovative fintech business models. Innovation facilitators play a central role in mapping approaches applied to fintech and in identifying the areas where the legislation and licensing requirements need changes and adaptation. Moreover, innovation facilitators, especially regulatory sandboxes, may have an impact on the licensing regime for fintech firms and may allow for divergence from other jurisdictions. In response, ESMA jointly with the EBA and EIOPA published the report on regulatory sandboxes and Innovation Hubs in January 2019. In addition, the European Forum of Innovation Facilitators established in April 2019 aims to foster convergence in this area.

    The report addresses one of the five action points of the EC FinTech Action plan, namely the mandate of ESMA "to map current authorizing and licensing approaches for innovative fintech business models in Europe."

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Fintech Action Plan, Fintech, Crypto-Assets, Distributed Ledger Technology, Cyber Risk, Cloud Outsourcing, Fintech License, ESMA

    Related Articles
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News
    News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697