The German Banking Industry Committee (GBIC) welcomes the Basel Committee’s initiative to examine the effects of FinTech for banks and banking supervision. The Basel Committee’s consultative document combines historical research, analysis of current media and industry periodicals, surveys on Basel Committee members’ activities, Fintech product analysis and scenario analysis. Based on this work, the Basel Committee sets out in the consultative document 10 key observations and related recommendations on supervisory issues for consideration by banks and bank supervisors.
From the perspective of German banks, the study is largely comprehensive and accurate, yet it urgently needs supplementing by a globally important aspect.
From the GBIC’s point of view, regulators not only have the duty of supervising individual players to ensure a fair and secure state of play whilst observing the rules – but in particular, to ascertain a level playing field and fair rules. In the wake of digitalisation, the game has already changed – to an extent that urgent action is required:
According to the GBIC there is little point in regulators ‘tightening the net’, when there is a gaping hole in that net: “ These issues are not some distant future scenario: BitCoin is already big in the market, with successor technologies becoming established. This issue may be exacerbated abruptly once the ‘BigTechs’ – which the survey correctly portrays – enter the market. There is urgent need for action in this respect, which makes all the other aspects that the survey correctly identifies pale by comparison.”
German banks therefore suggest giving priority to adapting the regulatory canon (above all calls for action mentioned in the survey) in order to ensure full coverage of the financial markets, and to create a level playing field, with the same rules applicable to all players. In this context, regulatory requirements should be defined so as to ensure the principle of proportionality, in a risk-adequate manner, to prevent any impediments to innovation.
In this respect, German banks propose compiling a catalogue of risks (and corresponding regulatory requirements) that distinguishes providers – both by the products and services they offer and by the systemic risks they represent. For instance, a FinTech which only offers deposits products, and which is not classified as being systemically relevant, might only be required to fulfil requirements regarding product documentation and deposit guarantee schemes (as a FinTech, plus basic IT security requirements). The clearer and more straightforward such a catalogue can be defined, the lower any impediments to innovation will be – and the fairer competition will focus on clients, rather than on regulation.
Such a revision may map the plethora of requirements under individual – and frequently overlapping – regulations (GDPR, ePrivacy Directive and the new proposal for an ePrivacy Regulation, the NIS Directive, the UCPD, the Distance Marketing of Financial Services Directive, PSD, MCD, CCD, PAD, PRIIPS, IDD, MiFIDII/MiFIR, UCITS, AIFMD, EMIR, Solvency II, CRD IV, AMLD) to specific products and services, thus creating a large part of the transparency intended to be achieved through innovation hubs.
View GBIC’s comments on the implication of FinTech developments from 27 October 2017.
(The German Banking Industry Committee is the joint committee operated by the central associations of the German banking industry. These associations are the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR), for the cooperative banks, the Bundesverband deutscher Banken (BdB), for the private commercial banks, the Bundesverband Öffentlicher Banken Deutschlands (VÖB), for the public banks, the Deutscher Sparkassen- und Giroverband (DSGV), for the savings banks finance group, and the Verband deutscher Pfandbriefbanken (vdp), for the Pfandbrief banks. Collectively, they represent approximately 1,700 banks.)