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 Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    News

    EU Publishes Corrigendum to Revised Capital Requirements Regulation

    EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).

    February 25, 2021 WebPage Regulatory News
    News

    ESAs Issue Statement on Application of Sustainability Disclosures Rule

    ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).

    February 25, 2021 WebPage Regulatory News
    News

    EC Consults on Crisis Management and Deposit Insurance Frameworks

    EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.

    February 25, 2021 WebPage Regulatory News
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    EBA Proposes Standards for Supervisory Cooperation Under IFD

    EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Addresses Banks in Scope of First Resolvability Assessment

    BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.

    February 24, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6629