The number of initiatives intended to facilitate financial innovation in the EU has increased rapidly in recent years. In a report published on Monday 7 January, the three European Supervisory Authorities (ESAs) for finance analysed the initiatives in depth in order to identify best practice and provide guidance for the future.
The report focuses on two main categories of innovation facilitator: -innovation hubs, which provide companies with a point of contact with the competent authorities to obtain guidance on compliance of innovative financial products with regulatory requirements; - sandboxes, which are safe, controlled spaces where companies can test innovations on the market, with or without regulatory relief.
To date, 21 Member States have created innovation hubs and five Member States (Denmark, Lithuania, the Netherlands, Poland and the United Kingdom) have sandboxes in operation, according to the report.
One of the main challenges for the development of innovation in the EU identified by the ESAs is cross-border coordination. Both types of innovation facilitator are currently operating at the national level. However, the competent authorities in different countries frequently adopt different regulatory and supervisory positions with regard to the same innovation, making it difficult to extend innovation to more than one Member State, the report explains.
This can also pose risks in terms of forum shopping and regulatory arbitrage, thus creating an uneven playing field, the report points out.
To inform future thinking on financial innovation, the ESAs recommend the development of joint ESA own-initiative guidance, while recognising the need to give national authorities sufficient flexibility to set up appropriate mechanisms for their innovation facilitators.
The ESAs also recommend the creation of an EU network to bridge innovation facilitators established at the Member State level, open to all competent authorities in the EU, as a platform to help participating authorities adopt common regulatory and supervisory approaches to dealing with financial innovations.
This assessment was requested by the European Commission in its Financial Technology Action Plan ('FinTech'), presented last March (see EUROPE 11977). The Commission is therefore now expected to present a best practice guide in the first half of 2019. (Original version in French by Marion Fontana)