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Regulators Accelerate Efforts to Streamline Global Fintech Guidelines

August 09, 2018, 07:25 AM
Filed Under: FinTech
Related: Fintech, Regulatory

The Bureau of Consumer Financial Protection (BCFP), working in collaboration with 11 financial regulators and related organizations, announced an initiative to create the Global Financial Innovation Network (GFIN).

The network will seek to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. It will also create a new framework for cooperation between financial services regulators on innovation-related topics.

The move comes on the heels of a new report from the Treasury Department that explores the new opportunities fintech offers non-bank financial companies. 

"Treasury's review of the regulatory framework for nonbank financial institutions and innovation more broadly has identified significant opportunities to accelerate innovation in the United States..," the report says. noting "a wide range of measures that could promote economic growth, while maintaining strong consumer and investor protections and safe guarding the financial system."

As ABL Advisor reported this month, fintech investment in the U.S. reached a new high of over $8 billion in Q2, following a strong first quarter, according to a new report from KPMG. Total investment during the first half of 2018 increased from $12.2 billion across 371 deals during the second half of 2017, and included more than 10 $100 million+ mega rounds.

Moody's Investors Service recently warned that digital innovation in financial services is placing a premium on efficiency and opening up competition that will continue to drive disruption across banking business segments, including payments, lending, capital markets and wealth management.

"To date, regulatory requirements have been a moat protecting incumbents. The traditional, more regulated banking model -- reliant on cheap, sticky deposits -- retains a significant advantage for incumbents over non-bank platforms. However, recent regulatory initiatives signal increasing openness to fintech. Regulatory sandboxes and open banking initiatives indicate a shift in authorities' willingness to encourage innovation and competition," Moody's reported.

The BCFP's collaborative effort is organized around a draft document thatsets out the three main proposed functions of the GFIN:

  1. To act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models;
  2. To provide a forum for joint policy work and discussions; and
  3. To provide firms with an environment in which to trial cross-border solutions.

The BCFP and the other regulators are seeking views on the mission statement for the GFIN, its proposed functions, and where it should prioritize activity. The group would also welcome hearing from other interested regulators who wish to get involved. In the United States, interested parties can provide feedback to the Bureau’s new Office of Innovation.

"Joining the Global Financial Innovation Network (GFIN) demonstrates the Bureau’s commitment to promoting innovation by coordinating with state, federal and international regulators," said BCFP Acting Director Mick Mulvaney. "We look forward to working closely with other regulatory authorities—whether in the United States or abroad—to facilitate innovation and promote regulatory best practices in consumer financial services."

The BCFP's announcement follows an initial whitepaper on the idea of a 'global sandbox' led by the United Kingdom’s Financial Conduct Authority (FCA) in February 2018. Some 50 responses were received to the earlier paper and supported the idea of regulators collaborating on this topic.

The working group is asking for feedback on questions contained in the Consultation Document by October 14, 2018. Over the course of the next two months, the group will engage with interested parties across different jurisdictions. In the fall, the working group will assess feedback and agree on next steps.

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