EBA hints at future regulatory harmonisation for fintech

Fintech mapping exercise discloses range of different regulatory approaches within Europe’s slice of the sector, raising level playing field concerns

There are growing signs that Europe’s fintech sector could be heading for regulatory harmonisation, following a European Banking Authority (EBA) analysis of the sector.

In a 4 August discussion paper on its approach to fintech, the EBA explains that it carried out a detailed mapping exercise of the EU’s slice of the industry earlier this year, in which competent national authorities provided it with data on the firms they oversee.

That data included each individual firm’s regulatory status.

In light of that evidence, the EBA makes three observations:

1. ”The different treatment of fintech firms offering similar financial services could benefit from further investigation, as differences could potentially lead to level playing field issues and forum shopping for the most amenable regulatory treatment.”
2. ”In terms of regulatory status, a significant percentage of fintech firms in the sample were subject to no regulatory regime [at all], or have an unidentified regime. While the EBA acknowledges that there could be legitimate reasons for some fintech firms not being subject to (financial) regulation and supervision, there may be merit in investigating the approaches to the monitoring of the fintech sector in order to ensure that risks are appropriately identified and addressed.”
3. ”The significant number of reported sandboxing regimes, innovation hubs or similar regimes appear to have varying features, which suggests that there may be a need to further analyse these regimes. A question that arises is whether the means used to achieve the aim of sandboxing regimes to facilitate innovation and competition – including the waiving of particular [regulatory] requirements and the eligibility of particular entities to be included – are in line with existing EU directives and regulations.”

With those points in mind, the EBA is now consulting with stakeholders on plans to carry out a full-scale comparison study of the different national regulatory regimes in place.

Any such work, says the EBA, would lead to the production of an official report and – if appropriate – opinion.

That document would examine the regulatory treatment of selected activities, and the provision of different forms of financial products and services under national and EU law, with a view to reviewing regulatory perimeters.

The review would encompass the nature of the regulated activities prescribed in EU law, together with level playing field and consumer-protection issues.

It would also take into account levels of activity and risk, and how any additional regulation in the field could affect fintech’s development in the region.

As part of that process, the EBA says that it plans to undertake work “to assess the merits of harmonising the assessment of applications for authorisations, in order to achieve greater consistency in supervisory practices”.

Find the full EBA discussion paper here.