Tag: FCA

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The Sandbox is getting crowded
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UK grants FinTech a banking licence – another tier of regulation?
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FCA Feedback Statement on RegTech
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FCA research into the issue of de-risking
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New “FinTech Bridge” between UK and Singaporean FinTech companies and investors
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FinTech start-ups to play in the FCA Sandbox
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FCA Encouragement for Roboadvice
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Robo Advice Regulation Movement in Three Jurisdictions

The Sandbox is getting crowded

By Jonathan Lawrence

In a recent speech delivered at the British Bankers’ Association FinTech Banking Conference, Christopher Woolard, the Director of Strategy and Competition at the UK Financial Conduct Authority spoke about the high level of interest in the FCA’s Regulatory Sandbox for FinTech ventures. The Sandbox aims to create a ‘safe space’ in which FinTech businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the activity.

Of 69 applications to join the Sandbox, the FCA has accepted 24 to develop towards testing. The FCA’s team has been expanded to meet demand. 40 of the unsuccessful first time applicants will be offered assistance via Project Innovate or other FCA staff, in some cases to prepare for the next cohort of the Sandbox.

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UK grants FinTech a banking licence – another tier of regulation?

By Jim Bulling and Michelle Chasser

Has the age of the digital bank arrived in the UK? Following the authorisation of Atom Bank last year, 3 additional digital banks have been issued with banking licences by the UK Prudential Regulation Authority (PRA) since May 2016.

These new licensees are the result of the PRA’s focus in recent years on lowering the barriers to entry for new banks and promote competition in the UK. As part of this focus, in 2013, PRA lowered the initial minimum capital requirements for Small Specialist Bank applicants to €1 million or £1 million (whichever is higher), plus a capital planning buffer (CPB). PRA and the Financial Conduct Authority (FCA) also launched a New Bank Start-up Unit in January 2016 to assist applicants with the authorisation process. Read More

FCA Feedback Statement on RegTech

By Jonathan Lawrence

The UK Financial Conduct Authority defines RegTech as “a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities”. In November 2015, the FCA asked for views on how it should progress and prioritise its RegTech work. It received more than 350 responses from established financial services firms, technology suppliers and FinTech start-ups and the FCA also convened roundtable meetings. The feedback statement was released on 20 July.

The main themes that emerged concerned technology that:

  • allows more efficient methods of sharing information
  • drives efficiencies by closing the gap between intention and interpretation
  • simplifies data, allows better decision making and the creation of adaptive automation
  • allows regulation and compliance processes to be looked at differently

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FCA research into the issue of de-risking

By Jacob Ghanty

In July 2015, the FCA commissioned research into the banking phenomenon known as “de-risking”. De-risking refers to banks removing bank accounts and services from customers or other relationships that they perceive as having higher money laundering (ML) risk. There has been a perception that this process is driven by banks’ concerns about ML and terrorist financing (TF) risks posed by certain types of customer, which have been heightened by large regulatory fines imposed on banks, notably in the United States, for failings in anti-money laundering (AML) processes and breaches of sanctions. The FCA recently published the consultants’ report.

There has been much publicity of the effects of de-risking in the money services business (MSB) and money remittance sector. However, the report shows that the issue affects other businesses as well, including pawnbrokers, fintech companies and charities operating in geographical areas where the perceived ML and TF risk is greater. The report concludes that banks take the issue of de-risking seriously and are mindful of their obligations to treat customers fairly and of the financial inclusion agenda. The banks believe that they are attempting to apply the risk-based approach to financial crime in an even-handed and objective way, given inherent uncertainties about how customers will behave and how regulators and courts will view their own position in relation to misconduct in accounts that they hold. Regardless of the drivers of de-risking, the report confirms that there is no “silver bullet” for the issue. It suggests potential solutions may lie in balancing of costs and risks between banks and high risk sectors and a better developed understanding of how to measure ML and TF risk on a case-by-case basis.

The FCA’s response to the report is to admit that de-risking is a complex issue. It warns that banks should not use AML as an excuse for closing accounts when they are closing them for other reasons. The FCA also warns banks of their obligations under competition law when deciding whether to terminate existing relationships or decline new relationships.

Looking to the future, certain legislation may help some sectors affected by de-risking. From 18 September 2016, the Payment Accounts Regulations (SI 2015/2038) (PARs) will require some banks to offer a payment account with basic features to consumers legally resident in the EU. Also, PSD2 needs to be implemented by 12 January 2018, requiring payment institutions to have access to credit institutions’ payment account services on an objective, non-discriminatory and proportionate basis.

New “FinTech Bridge” between UK and Singaporean FinTech companies and investors

By Jonathan Lawrence

The UK Government has announced a new “FinTech Bridge” to help UK FinTech firms and investors access the Asian market and expand to Singapore, as well as attracting Singaporean FinTech companies and investors to the UK.

The launch on 11 May 2016 included the signing of a regulatory cooperation agreement between the Financial Conduct Authority (“FCA”) and the Monetary Authority of Singapore (“MAS”). The agreement will enable the regulators to refer FinTech firms to their counterparts across the globe. It also sets out how the regulators plan to share and use information on financial services innovation in their respective markets.

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FinTech start-ups to play in the FCA Sandbox

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) recently released its 2016 Business Plan. Possibly the most eye-catching initiative is the regulatory sandbox. The sandbox has been formed to provide a safe environment for businesses to test their products. For new entrants to the financial services market, the intention is that unauthorised businesses can use the sandbox to test products, services, business models and delivery without first needing to meet all of the normal regulatory requirements and incurring the costs of putting in place the complex structures and processes to successfully apply for regulatory authorisation. These firms will be granted limited authorisation for testing purposes. The FCA has suggested a number of safety measures for consumers ranging from informed consent through to the businesses in the sandbox providing a meaningful indemnity for losses. Furthermore, the FCA will apply discretion in determining both the level of limited authorisation and the safety measures on a case-by-case basis rather than forcing a one-size-fits-all model.

Firms and businesses interested in utilising the sandbox must satisfy specified criteria and apply for the first cohort between 9 May and 8 July 2016. The second cohort will have an application deadline of mid-January 2017.  The sandbox will not be available for activities which fall outside of the Financial Services and Markets Act 2000. For example, payment service providers and e-money issuers already potentially benefit from the lighter touch regimes in the Payment Services Regulations and the Electronic Money Regulations. Accessing the sandbox is not straightforward, and businesses will need to give careful consideration as to whether they might qualify. The success of the sandbox is in part dependent on the quality of applicant. If businesses do their bit and if the FCA continues the trend of assisting disruptors where it can then the sandbox could fulfil the initial optimism around the initiative.

FCA Encouragement for Roboadvice

By Jacob Ghanty

The UK’s Financial Conduct Authority published its final report on the Financial Advice Market Review on 14 March, which stated that there is a “clear need for intervention by the regulator and the government” to aid the provision of new and more cost-effective ways of delivering financial advice and guidance. The FAMR sets out recommendations to address concerns relating to the affordability and accessibility of financial advice, which includes recommendations to help firms develop automated “robo-advice” models.  In the linked article, first published in E-Finance & Payments Law & Policy, Jacob Ghanty expresses his views on robo-advice developments.

 

Robo Advice Regulation Movement in Three Jurisdictions

by Jim Bulling and Michelle Chasser

After increasing concerns that robo-advisers may not fit neatly into existing regulations, Australian, United States and United Kingdom regulators have all indicated in the last few months that they will be looking at the appropriateness of current regulations for the increasingly fast growing industry of automated financial advice.

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