FCA Publishes Call for Input on Cross-Sector Sandbox
FCA is inviting comments on the concept of a cross-sector sandbox. This Call for Input has been published to expand and deepen the discussions on whether a cross-sectoral sandbox or a similar mechanism is needed to ensure a consistent and efficient approach to emerging technologies. The Call for Input offers an overview of what a sandbox is and, using case studies, explains the opportunities and challenges a cross-sectoral sandbox could pose for firms and regulators. Comments are requested until August 30, 2019.
FCA has explained that emerging technologies, such as artificial intelligence and distributed ledger technology, are changing business models across all markets. Regulators are needed to ensure that they are adapting to these changing market conditions and can respond to support firms, protect consumers, and ensure that markets work well. FCA suggests that cross-cutting nature of these technologies and challenges suggests that a practical way of working between regulators should be established. There are multiple mechanisms or frameworks that could support a collaborative approach. Based on experience with the FCA sandbox, FCA suggests a cross-sector sandbox could be one such approach. It would provide a single-point-of-entry sandbox for firms to test innovative propositions with multiple UK regulators, in a controlled environment. Experience suggests that this could be a way to help innovation flourish while also ensuring traditional policy aims of ensuring consumer protection and promoting competition are maintained.
Opportunities and benefits of a cross-sector sandbox include helping to facilitate small-scale, controlled tests of innovative propositions and helping firms, especially those with complex business models or business models that span more than one sector, to navigate the requirements of different regulators. It could also provide shared lessons for regulators, as they would have the opportunity to understand how different sectors are responding to different technologies and emerging trends. This could help inform a coherent UK approach to cross-cutting innovations.
The Call for Input also discusses challenges with a cross-sector sandbox. This includes a lack of proven demand, a misunderstanding about the purpose of the sandbox, and firms not improving their own in-house knowledge. These are also the challenges FCA faced with its current sandbox and FCA believes that there are ways to mitigate them by creating eligibility criteria that require firms to show a need for testing to ensure that only those innovative ideas that would benefit from a sandbox test would be accepted. Another way to mitigate these challenges is by ensuring that firms do due diligence before any test by demonstrating that they understand the regulatory framework in which they operate. Additionally, there could also be a challenge around different aspects of the tests as regulators have different remits and, therefore, regulators may arrive at different conclusions when looking at the same test. However, having more discussions on a proposition can also help ensure that a test is more robust. Overall, FCA suggests that a cross-sector sandbox could be a good starting point for the type of practical collaboration that is needed.
Related Link: Call for Input (PDF)
Comment Due Date: August 30, 2019
Keywords: Europe, UK, Banking, Securities, Artificial Intelligence, Distributed Ledger Technology, Cross-Sector Sandbox, Fintech, Regtech, FCA
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023