FDIC published a statement on overseeing the fintech revolution from domestic and international perspectives. This statement was delivered before the Task Force on Financial Technology of the Committee on Financial Services, U.S. House of Representatives. FDIC Chairman Jelena McWilliams launched a new organization within FDIC—the FDIC Tech Lab or FDiTech. This new entity will promote the adoption of innovative and transformative technologies in the financial services sector, help FDIC better understand how innovation can contribute to the expansion of banking services, and promote the adoption of technology that can help community banks compete in the modern financial marketplace.
Although FDiTech is just getting started, FDIC has taken steps to increase coordination and cooperation with technology firms, fellow regulators, and the institutions FDIC oversees. The goals of FDiTech encompass engagement and collaboration with innovators in the financial and non-financial sectors to identify, develop, and promote technology-driven solutions that:
- Improve the safety and soundness of FDIC-insured institutions
- Support the development and adoption of innovative financial products and services
- Promote competition
- Support the early identification of risk at financial institutions or in the financial system
- Facilitate the efficient resolution of failed financial institutions, when that is needed
With the potential for so much change, it is incumbent upon FDIC to understand how emerging technology can improve its approach to supervision. FDIC is in the process of developing and implementing updates to its information technology systems to bring much needed improvements to the systems that banks and non-banks use to interface and exchange information with FDIC. Regulators are mindful that their approach to oversight and regulation can affect the extent and speed of implementing financial innovation and are striving to be forward-thinking, while maintaining the necessary protections of underlying regulations. Although FDIC is still in the process of standing up FDiTech, significant resources have been dedicated to identify and understand emerging technological developments and their impact on insured depository institutions, customers, and the financial system overall. The FDIC approach to innovation involves the following aspects:
- Providing a safe regulatory environment to promote the ongoing technological innovation
- Promoting technological development at community banks with limited research and development funding to support independent efforts
- Identifying policy changes—particularly in the areas of identity management, data quality and integrity, and data usage or analysis— that must occur to support innovation while promoting safe and secure financial services and institutions
- Achieving transformation, in terms of technology, examination processes, and culture, to enhance the stability of the financial system, protect consumers, and reduce the compliance burden on regulated institutions
FDIC is examining trends and developments in wholesale and retail financial markets, including machine learning and artificial intelligence, big data, open banking, consumer-permissioned data-sharing, and application programming interfaces. Through ongoing supervisory processes, FDIC regularly reviews uses of technology by the supervised institutions. This includes innovations by FDIC-supervised institutions as well as activities conducted through third-party relationships. On the international front, FDIC is a part of the BCBS Task Force on Financial Technology. The work of the Task Force work resulted in the publication of "Sound Practices: Implications of fintech developments for banks and bank supervisors," which assesses how technology-driven innovation in financial services may affect the banking industry and the activities of supervisors in the near- or medium-term.
Related Link: Statement
Keywords: Americas, US, Banking, Fintech, FDiTech, Regtech, FDIC Tech Lab, FDIC
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