The approach to the use of technological innovation for supervisory purposes (RegTech) needs to be “balanced” to promote market efficiency while ensuring oversight of the associated risks, the European Banking Authority (EBA) said in a report published on Tuesday 29 June.
RegTech solutions are most often used for anti-money laundering and terrorist financing and fraud prevention (automated behavioural tracking), to comply with reporting obligations, to enhance security and to assess a borrower’s ability to repay.
The challenges arising from the evolution of RegTech affect the internal organisation of financial institutions and service providers. They are related to data quality, security and protection, interoperability and integration of innovations into existing IT systems, insufficient technical capacity, and lengthy and costly due diligence processes.
While the current regulatory framework is not the main obstacle to the integration of RegTech solutions, the lack of harmonised standards in the internal market may hamper the market uptake of such solutions.
In view of these findings, the EBA proposes that the following initiatives be taken: - develop the skills of supervisors; - support the convergence of supervisory practices in the EU; - clarify expectations for RegTech oversight; - further harmonise regulatory requirements; - strengthen the role of the European Forum for Innovation Facilitators platform established in 2019 by the three European banking, insurance and financial market supervisors.
See the report: https://bit.ly/3w2vskk (Original version in French by Mathieu Bion)