Nick Cook of FCA on Moving from Innovation Hub to Innovation Culture
Nick Cook, Director of Innovation at FCA spoke at the 6th Central Bank Executive Summit about how data and technology have, and are, changing the way FCA regulates, the ways FCA has reacted to and embraced that change, and how this approach has evolved over time. He also addressed the issues of what regulators and central banks will need to look like in the near future, the actions they will need to take, the resources they will need at their disposal, and the type of culture they will need to create: "a culture where innovation and new ways of approaching old problems are considered business as usual, rather than being undertaken in a ring-fenced or siloed function unique and distinct from the organization that it sits in."
He emphasized that "a regulator should enable change to happen" and "the driver behind this need for change is in part the enormous and quickening pace of development and progress in the use of technology and data within financial services." He outlined the success achieved by FCA in the area of regtech, wherein FCA held TechSprints to encourage collaboration and new ideas and observed and supported proofs of concepts to encourage firms to think about how technology could make them more efficient at complying with regulation. Next, he explained the FCA ambitions, including its work toward international engagement via the Global Financial Innovation Network or GFIN, global regtech work, chairing of the IOSCO FinTech network, and formal and informal knowledge-sharing arrangements with authorities such as MAS, Australian Securities & Investments Commission (ASIC), Financial Industry Regulatory Authority (FINRA), and FDIC. Depending on what the future brings, FCA will also be a keen participant of the European Forum for Innovation Facilitators, said Mr. Cook. The second ambition of FCA involves actively stimulating innovation in the market to deliver public value. To this end, FCA has identified GreenTech as a priority and will hold a second AML & Financial Crime TechSprint in London in July 2019. He added that the third area of FCA ambition is "around changing ourselves as a regulator."
The ambition is to instigate a cultural change in an organization that goes beyond the creation of Innovation Divisions and Innovation Directors. He mentioned adopting "suptech" programs to become more efficient and effective, to keep in step with the sweeping change that technology is instigating in the markets, and the firms that FCA regulates. One way FCA is doing this is through its digital regulatory reporting work. As part of this work, FCA is investigating how technology can fundamentally change the interface between FCA and the regulated firms by making parts of its Handbook machine-readable and machine-executable. In the longer term, bringing these data and analytics capabilities together to deliver near real-time monitoring of priority markets, to allow us to identify harm rapidly and to deter misconduct, is the goal.
Finally, he discussed the challenges in the area of regtech, with one of them being the unavailability of an array of "off-the-shelf" technology solutions available for regulators and central banks. The regtech market is not fully able to "service our needs at this stage" and "we need to develop the solutions ourselves, in-house," added Mr. Cook. Another challenge, according to him, is "how we make this change lasting" and "make innovation part of our DNA, our business as usual." He said that, "It may seem odd for a leader of an Innovation Division to call for federating innovation capabilities rather than centralizing them, but, I believe, we will not achieve the transformation and outcomes we desire if the innovation activities remain contained within ring-fenced innovation functions. We must empower and engage our wider organization and federate new skills, capabilities, and behaviors widely."
Related Link: Speech
Keywords: Europe, UK, Banking, Insurance, Securities, Regtech, Suptech, Fintech, Innovation Culture, FCA
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