EU Expert Group on Regulatory Obstacles to Financial Innovation Publishes Recommendations on Regulatory Framework for FinTech12/13/2019The EU Expert Group on Regulatory Obstacles to Financial Innovation (or ROFIEG) has published a set of Recommendations and a Q&A on the establishment of an accommodative framework for FinTech in the EU. The ROFIEG was established by the European Commission in 2018 to provide expertise on technology in the financial services sector and, in particular, to review the EU’s legal and regulatory FinTech framework. The Recommendations are grouped into four categories:
Adaptation of regulation to new risks arising from innovative technologies
1. Development of measures and guidance by the European Commission clarifying when requirements on the explainability or interpretability of artificial intelligence and associated technologies should be implemented, and how;
2. Requirements for regulated entities to build adequate IT governance and technological expertise;
3. Development of a cyber resilience testing framework for the financial sector;
4. Clarification of the regulatory framework applicable to distributed financial networks;
5. Acceleration of the European Commission’s work assessing the adequacy and suitability of rules governing crypto-assets;
6. Standardization of legal terminology and digital standards classifications; and
7. Development of a strategy for the establishment of regulatory “clearing houses” that would centralize the dissemination of rules to regulated entities.
Removal of regulatory fragmentation
1. Assessment of the need for an EU regulatory sandbox;
2. Review of fragmented financial regulation;
3. Harmonization of know-your-customer processes for the financial sector in line with the Anti-Money Laundering Directive; and
4. Evaluation of the need for revisions to the Settlement Finality Directive to allow any regulated financial institutions to participate in clearing and settlement and payment systems.
Reconciliation of data regulation with FinTech
1. Development of guidance by the European Data Protection Board on the application of data protection legislation to the use of technology in financial services, including Blockchain and AI;
2. Development of measures to provide legal certainty on access to and processing of non-personal data by different stakeholders; and
3. Introduction of rules to ensure that users of digitally enabled products may be able to share the data that providers of such products have collected on them with their choice of market participants.
Consideration of the potential impacts of FinTech on financial inclusion and ethical use of data
1. Monitoring by the European Commission of the increasing use of technology-driven financial services; and
2. Development of guidance by the European Commission on the ethical use of data by financial institutions.
View the ROFIEG's Recommendations.
View the ROFIEG's Q&A.
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Financial Regulatory Developments Focus