Last month, the Financial Conduct Authority announced plans to launch a new Global Financial Innovation Network.
The Network is being built in collaboration with 11 financial regulators and related organisations. It aims to provide a more efficient way for innovative firms to interact with regulators, intending to build on the Regulatory Sandbox set up by the FCA in 2014 by creating a ‘global sandbox’.
The FCA and innovation
The regulator has been a long-standing supporter of innovation. It was one of the priority areas set out in the Authority’s Business Plan, released in April, where stated priorities included:
- Assisting firms through the FCA Innovate programme
- Allowing firms to test viability via its regulatory sandbox
- Testing and applying regtech and analytics to regulation – something we looked at in our blog FCA to automate regulation – what it means for you?
How will the new Network help firms wanting to innovate?
The network has three main functions, described by the regulator as being to:
- Act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models;
- Provide a forum for joint policy work and discussions; and
- Provide firms with an environment in which to trial cross-border solutions.
The FCA hopes that the network will help firms to scale up new ideas by providing a more efficient way for them to interact with regulators across countries.
It also aims to create a new framework for co-operation between financial services regulators in different jurisdictions on innovation-related topics, enabling them to share different experiences and approaches.
It already has members from a number of countries, with final membership still to be determined. Current members are:
1. Abu Dhabi Global Market (ADGM),
2. Autorité des marchés financiers (AMF, Quebec)
3. Australian Securities & Investments Commission (ASIC)
4. Central Bank of Bahrain (CBB)
5. Bureau of Consumer Financial Protection (BCFP, USA)
6. Dubai Financial Services Authority (DFSA)
7. Financial Conduct Authority (FCA, UK)
8. Guernsey Financial Services Commission (GFSC)
9. Hong Kong Monetary Authority (HKMA)
10. Monetary Authority of Singapore (MAS)
11. Ontario Securities Commission (OSC, Canada)
12. Consultative Group to Assist the Poor (CGAP)
The launch communications make it clear that although this is the current member list, this membership may change, either via current members leaving or new ones joining, as the project moves forward.
There is also the potential for the creation of a steering group made up of a smaller number of members, to oversee the wider membership. Any steering group would be chaired by one of the members.
Next steps for the GFIN
The FCA is seeking views on the Network and has launched a consultation, to run until 14 October 2018.
The regulator is encouraging participation in the consultation from: innovative financial services firms, financial services regulators, technology companies, technology providers, trade bodies, accelerators, academia, consumer groups and other stakeholders keen on being part of the development of the GFIN.
The consultation document is available on the FCA website and seeks views on, among other things:
- The GFIN Mission Statement
- Its proposed functions
- Where its priorities should lie
You can respond to the consultation by emailing GFIN@fca.org.uk by 14 October 2018.
Innovation and regulatory compliance
Any regulated firm has to marry their innovation ambitions with the need to comply with relevant legislation. We’ve looked before at how you can innovate in a compliant way and shared tips on the 5 compliant steps you need to take if you want to innovate.
Of course, there are ways that innovation and new technologies can support, rather than threaten, your ability to comply with regulations. Regulation technology – regtech – can be used to make regulatory compliance cheaper, quicker and more efficient.
If you want to reduce your risk in any digital transformation projects, the risk of compliance breaches should be near the top of your list.
The FCA’s proposed new Network may provide one way to manage these risks and help firms to innovate and grow in ways that comply with international regulatory requirements.
For more background on the current regulatory landscape – and tips on how to tackle the challenges you face – you might want to read our whitepaper, Why governance, risk and compliance are what you should focus on now. The whitepaper is free to download, and you can get a copy here.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.