Featured Product

    ESMA Responds to EC Consultation on Digital Finance Strategy

    June 29, 2020

    ESMA published its response to the EC consultation on the new digital finance strategy for EU. Steven Maijoor, the ESMA Chair, has issued a letter to EC that summarizes key points of response of ESMA. ESMA welcomes the EC consultation noting that it builds on the 2018 Fintech Action Plan that set a number of deliverables for the ESAs, all of which were completed. ESMA believes that certain initiatives, such as developing Digital Financial Identities, would support the goal of removing fragmentation in the digital financial services market. The response also outlines several conditions needed for a well-regulated data-driven financial sector, including data standardization and data security.

    The following are the key highlights of the response from ESMA: 

    • Identifying risks and benefits of digitalization of the financial sector. The response outlines the benefits and challenges of digitalization in the financial sector, based on ESMA analyses. The benefits include increased speed, efficiency, and convenience; greater economies of scale; and development of automated tools to help firms and authorities detect cases of poor conduct. The response also highlights the risk areas of digitalization, which include data security, operational incidents, data privacy, price segmentation, sales practices, and the financial exclusion of some individuals.
    • Ensuring a technology-neutral EU financial services regulatory framework that supports innovation. An EU-wide harmonized regulatory or supervisory framework is necessary to allow innovative firms in EU to reach the scale that they need and provide for the necessary safeguards to investor protection, financial stability, and orderly markets.
    • Removing fragmentation in the single market for digital financial services. An important way to address fragmentation in the single market for digital financial services is through cooperation at EU level, for example, through the European Forum for Innovation Facilitators (EFIF) established by the Joint Committee of ESAs. ESMA believes that initiatives such as electronic identification initiatives can support the goal of removing fragmentation in the single market for digital financial services. ESMA believes it would be important to develop Digital Financial Identities that are usable and recognized throughout the EU. This depends on the introduction of a unique standardized and harmonized means of identification. Such means already exist in the financial sector in the form of the Legal Entity Identifier (LEI), which should be promoted to the maximum extent possible.
    • Promoting a well-regulated data-driven financial sector. Key requirements for efficient and easy use of data are data standardization and harmonization, security of IT systems, and legal certainty regarding pertinent responsibilities, liabilities, and usage permissions. Data quality issues should be addressed through robust verification mechanisms and text data need to be in machine-readable format. An important way in which data is driving the development of the financial sector is through tools based on artificial intelligence. Firms use such tools for their business and for regulatory reporting. Supervisory authorities are developing their own suptech tools, including examples that make use of artificial intelligence. ESMA has begun exploring new applications based on artificial intelligence. An area of particular interest is the potential for tools based on artificial intelligence (such as machine learning) to support statistics-related activities, such as flagging outliers and inconsistent entries in the databases that ESMA hosts. Nevertheless, guidance for the EU financial sector could still be welcome, as a complement to horizontal-level EU rules on artificial intelligence. It would also be necessary to incorporate privacy considerations into any horizontal-level rules, which would require a review of existing regulations in this area. 

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Fintech, Regtech, Suptech, ESEF, Digital Finance Strategy, Reporting, Machine-Readable Regulations, ESMA, EC

    Featured Experts
    Related Articles
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6004