In November 2015 the FCA issued a Call for Input seeking views on how it should progress and prioritise its work on RegTech. RegTech is a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.
The FCA has now published Feedback Statement 16/4: Call for input on supporting the development and adopters of RegTech (FS16/4) which provides a summary of the key themes from the responses to its earlier Call of Input and outlines the regulator’s approach in relation to RegTech.
In relation to the responses to the Call for Input the FCA groups issues into the following four main themes:
- efficiency and collaboration. For example, creating more flexibility for firms to provide their regulatory data which would reduce the costs and burden of regulatory reporting. This could be achieved by making it easier for firms to use different software to provide data to the regulator allowing firms to streamline processes and align internal systems;
- integration, standards and understanding. For example, machine-readable regulation could allow more automation and may significantly reduce the cost of change. Also, a more interactive FCA Handbook (termed as a ‘Robo-Handbook’) which is better tailored to a firm’s permission could make compliance and reporting requirements clearer;
- predict, learn and simplify. For example, the greater FCA use of big data analytics could reduce the regulatory reporting burden on firms. Modelling technology could also allow the impact (and unintended consequences) of regulation to be understood before it is implemented; and
- new directions. For example, blockchain / distributed ledger technology could improve system integrity and increase transparency.
In addition, respondents felt that FCA certification of RegTech that meet relevant criteria could build credibility. This could increase the acceptance of, and therefore investment in, new regulatory tools.In turn this could make guidance and standards easier to understand, reducing costs while improving compliance.
The FCA agrees with respondents’ that it has an active role to play in RegTech. It intends to concentrate its efforts on increasing its engagement and collaboration with the RegTech community, using its conventional authority to help bring together market participants to work on shared challenges and to act as a catalyst for change that would help unlock the potential benefits of technology innovation.
The FCA also sees that there is a potential, but limited, role for it to play in supporting the industry to define standards and guidelines in order to provide more certainty for firms purchasing new technology capabilities. The FCA notes certain limitations to the role it can play citing that the complexity, scale and diversity of legacy infrastructure and existing systems within some financial services firms make the implementation of new technologies challenging.
The FCA is looking for certain outcomes to improve compliance and reduce the cost of regulation for firms. These are as follows:
- encouraging innovation development and helping to identify opportunities for the adoption of new technologies that support the improvement of regulatory compliance and the interface between the regulator and regulated firms;
- engaging internationally to assist FinTech organisations gain access to other markets and vice versa, helping to ensure firms in the UK and globally have access to the best technologies; and
- to promote an industry where consumers have the appropriate level of protection and suitable access to the benefits of RegTech and FinTech.