Featured Product

    BCBS Report on Open Banking and Application Programming Interfaces

    November 19, 2019

    BCBS published a report that monitors the evolving trend of open banking and application programming interfaces (APIs) in certain Basel Committee member jurisdictions. The report presents key trends and challenges identified in this area through the information gathered from 25 Basel Committee members from 17 jurisdictions, with focus on supervised banks and customer-permissioned data. The report also discusses the implications of these developments for banks and bank supervision. The report builds on the findings of BCBS paper on the implications of fintech developments for banks and bank supervisors.

    The following are the key findings of the report with respect to the open banking frameworks:

    • Traditional banking is evolving into open banking. A number of jurisdictions have adopted, or are considering adopting, open banking frameworks to require, facilitate, or allow banks to share customer-permissioned data with third parties.
    • Open banking frameworks vary across jurisdictions in terms of stage of development, approach, and scope. Open banking is still in the early stages of development in a number of jurisdictions. Approximately half of the Basel Committee members have not observed significant open banking developments in their jurisdictions. There are benefits and challenges associated with each approach to open banking, when balancing bank safety and soundness, encouraging innovation, and consumer protection.
    • Data privacy laws can provide a foundation for an open banking framework. Many jurisdictions that have adopted open banking frameworks also updated or plan to update their data protection and/or privacy laws.
    • Multi-disciplinary features of open banking may require greater regulatory coordination. Within each jurisdiction, multiple authorities can have a role in addressing issues related to banks’ sharing of customer-permissioned data with third parties owing to the multi-disciplinary aspects of open banking.

    Open banking comes with not only benefits but also various challenges for banks, such as risks to the business models and reputation and issues regarding data, cyber security, and third-party risk management. Therefore, banks and bank supervisors would need to pay more attention to the challenges that accompany the increased sharing of customer-permissioned data and growing connectivity of various entities involved in the provision of financial services. The report identifies the following key challenges for banks and supervisors:

    • Challenges of adapting to the potential changes in business models
    • Challenges of ensuring data and cyber-security in an open banking framework
    • Time and cost to build and maintain APIs and the lack of commonly accepted API standards
    • Oversight of third parties can be limited, especially in cases where banks have no contractual relationship with the third party, or where the third party has no regulatory authorization
    • Assigning liability in the event of financial loss, or in the event of erroneous sharing or loss of sensitive data, which is more complex with open banking, as more parties are involved
    • Increase in reputational risk, even in jurisdictions where there are established liability rules

     

    Related Links

    Keywords: International, Banking, Open Banking, API, Operational Risk, Governance, Fintech, Cyber Risk, BCBS

    Featured Experts
    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR

    The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy

    The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8201