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

    FSB Sets Out Effective Practices for Cyber Incident Recovery

    FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.

    October 19, 2020 WebPage Regulatory News
    News

    HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol

    HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.

    October 16, 2020 WebPage Regulatory News
    News

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).

    October 16, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on BRRD2 Transposition

    HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).

    October 15, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.

    October 15, 2020 WebPage Regulatory News
    News

    BoE Publishes Reporting Schedule for Statistical Returns

    In a recent statistical notice, BoE announced publication of the reporting schedule for statistical returns for 2021.

    October 15, 2020 WebPage Regulatory News
    News

    EC Welcomes Declaration by Member States on EU Cloud Federation

    EC welcomed the joint declaration by 25 EU member states on building the next generation of cloud in Europe.

    October 15, 2020 WebPage Regulatory News
    News

    MAS Amends Notice on Issuance of Covered Bonds by Banks in Singapore

    MAS published amendments to Notice 648 on the issuance of covered bonds by banks incorporated in Singapore.

    October 15, 2020 WebPage Regulatory News
    News

    FDIC Selects Technology Companies for Rapid Prototyping Competition

    FDIC has selected 14 technology companies—including Accenture Federal Services, LLC, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the next phase of the rapid prototyping competition.

    October 15, 2020 WebPage Regulatory News
    News

    GLEIF Defines New Validation Agent Role for Financial Institutions

    GLEIF announced that financial institutions worldwide can realize a variety of cost, efficiency, and customer experience benefits by assuming a new “validation agent” role within the Global Legal Entity Identifier (LEI) System.

    October 15, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5979