A Provisional Green Light: Supervisors and Regtech

Regulators are looking to finally catch up with financial innovation, helping facilitate a future framework.

The UK’s Financial Conduct Authority (FCA) has been leading the way with Project Innovate, an initiative aimed at supporting firms who want to explore new approaches to more effectively and efficiently tackle regulatory challenges in financial services through technology innovation.

In a speech given to bankers at the BBA FinTech Banking Conference in September of 2016, Christopher Woolard, Director of Strategy and Competition at the FCA, confirmed that the regulator plans to ‘encourage innovation and adoption in technology’ by looking at how regulation can be approached in ‘new and creative ways’. Woolard went on to confirm that the FCA ‘recognises the burden of compliance’ and referred to the ‘billions of pounds and large numbers of staff dedicated to the business of regulation’.

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Regulatory Initiatives Gain Traction

Also in September, the Securities and Exchange Commission (SEC) announced its plan to host a public forum on fintech, in an effort to foster greater collaboration and understanding between the regulator, the regulated and the technology firms. The discussion will examine how the current regulatory environment can most effectively address new technology.

Australia has also set up a similar initiative to the UK that will look specifically at how to best manage and internally innovate around the intersection between regulation and technology.

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While development of Cloud-based technology is certainly a global movement and is disrupting contemporary views of data use and data processing in many industries, there are certain safeguards to be considered when applying this to financial business processes – including the compliance function.

UK financial firms have requested guidance from the FCA over how the term ‘Cloud’ should be defined, how it applies to them, as well as a framework for understanding operational and supply chain risks.

With this in mind, the FCA has proactively issued recommendations in the form of a guidance note that sets out appropriate safeguards for financial businesses when selecting a technology provider and for the effective procurement and monitoring of their Cloud solutions.

The guidelines give financial businesses a provisional green light and framework on how to move to the Cloud.

This post was written by Tom Pfister, Global Head of Regulatory Reporting Solutions Compliance Market Strategy at Confluence and Nicola Le Brocq, Regulation and Compliance Market Analyst.

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