European Supervisory Authorities publish joint report on innovation hubs and regulatory sandboxes
The “FinTech: regulatory sandboxes and innovation hubs” (Joint Report) was published by the European Supervisory Authorities (ESAs) on 7 January 2019. The Joint Report is applicable to FinTech and InsurTech firms, notwithstanding the nature and size of the service provider, and calls for a pan-European framework addressing regulatory sandboxes and innovation hubs (innovation facilitators).
Comparative analysis and best practices
The Joint Report was prepared pursuant to the FinTech Action Plan of the European Commission (EC) and sets out a comparative analysis of the design of existing innovation facilitators while recommending best practices to further encourage the consistency in the operation of innovation facilitators at EU-level. The Joint Report further promotes regulatory and supervisory transparency and cooperation between national authorities.
ESAs set out key policy options intended to support competent authorities when considering the creation of, or reviewing the operation of, innovation facilitators while ensuring the innovator facilitators do not discriminate against a particular business model. The Joint Report notes that different approaches to the design and operation of innovation facilitators may affect the relative attractiveness of jurisdictions as centres for financial innovation.
The Joint Report recommends two policy options which focus in particular on the development of a Joint ESA “own initiative guidance” covering active guidance, close monitoring and cooperation between innovation facilitators at EU level and on the creation of an EU network of innovation facilitators to “bridge” innovation facilitators established in the EU.
Annex B of the Joint Report outlines several best practices for innovation facilitators relevant to conducting due diligence, creating defined entry criteria, objectives and access policies in order to ensure a high level of transparency in the entry process. Additionally, the Joint Report consolidates certain recommendations and challenges related to how innovation facilitators handle technical challenges and how to retain staff with appropriate knowledge and experience of FinTech, highlighting the pace of change in the financial sector.
Competent authorities establishing or reviewing existing innovation facilitators are therefore expected to take into consideration the best practice principles outlined in the Joint Report. Additionally, the ESAs plan to further explore the options for improving cross-border cooperation at EU level and define additional steps in 2019.
If you have any questions, please contact Katerina Katsiami or your usual Harneys contact.