Fintech has developed with great speed but regulation and supervision have lagged behind
In recent years new tools have been developed that use technology to support new financial business models and to solve regulatory and compliance requirements more effectively and efficiently. In particular:
- “Suptech” is the term for any application of fintech for regulatory, supervisory and oversight purposes;
- “Regtech” refers to the application of financial technology (fintech) for regulatory and compliance requirements and reporting by regulated financial institutions.
The need to deploy these tools is becoming more urgent, argues Benoît Cœuré, especially since the COVID crisis has shown the importance of fintech in the global economy.
Current bank regulatory, supervisory and licensing frameworks generally predate the emergence of technology-enabled innovation. In some jurisdictions, prudential authorities do not have a remit for firms that are not banks, and some services previously conducted by banks are now being provided by other firms that may not be regulated by bank supervisors. Such fintech-related changes may therefore require regulators and supervisors to leave their comfort zone and reassess their current supervisory models and resources in order to ensure continued effective oversight of the banking system.
[U]pstream solutions and tools that would enable regulators to easily prepare and transmit machine-readable and machine-executable regulations to their regulated entities should result in greater regulatory compliance, lower regulatory costs and burdens,better data quality and consistency in regulatory reporting, and more timely surveillance by the regulatory authorities.
Leveraging technology to support supervision: challenges and collaborative solutions
By: Benoît Cœuré – BIS
No need to regulate fintech
In a recent op-ed Brian Brooks and Charles Calomiris of the Office of the Comptroller of the Currency, suggest that fintech companies should be regulated as regular banks are. But John Cochrane disagrees: banks, he argues, are different from fintech companies because the former are taking deposits. Bank regulation then is necessary because bank failures cause runs. Fintech companies don’t take deposits and hence do not pose a risk to the financial system. “So what’s the problem if a fintech company fails?”
Fintech in chains
By: John Cochrane – Stanford University
How about Wirecard?
Katja Langenbucher in this commentary argues that the case of the insolvent fintech company, Wirecard, provides evidence that we need to rethink existing regulation in order to restore confidence in fintech companies.
Wirecard – A scandal at the right time
By: Katja Langenbucher – Leibniz Institute, Goethe University Frankfurt
