Innovate Finance in partnership with Hogan Lovells Publishes RegTech for Regulators Report in Washington D.C.
June 26th, 2017 / Innovate Finance / News
Washington, D.C./ London, 23 June 2017: Innovate Finance’s Transatlantic Policy Working Group (TPWG) and Strategic Partner Hogan Lovells, today launched a report titled Future of RegTech for Regulators, Adopting a Holistic Approach for the Digital Era Regulator. The paper explores the potentially transformative role that regulatory technology (RegTech) might play in tackling the fragmented U.S. financial environment by providing an overview of the international movement in innovation and RegTech, as well as the current efforts by U.S. regulators. It also puts forward a framework by which regulators can assess their drive towards becoming leaders of digital change.
The field of RegTech has mainly targeted ‘process automation’, such as improving inefficiencies within regulatory reporting for financial institutions, and using technology to ease the burden of compliance.
This report focuses on the greater potential of RegTech for regulators. Representing a broader promise to encourage a ‘systems evolution’ or re-designing of the regulatory architecture including digital financial infrastructure (DFI), which may encompass anything from payment systems to shared reporting utilities.
A recommended RegTech framework to help regulators become leaders of digital changes is outlined in the report. It includes three broad approaches, which can be implemented alone or in tandem:
- Ecosystem – Government engaging with industry, such as LabCFTC in the U.S. and the Financial Conduct Authority’s regulatory accelerator can help identify new technology and market developments, allowing regulators to work closely with technology innovators and understand any process and regulatory infrastructure adjustments that may need to be made.
- Digital Financial Infrastructure – Implementing new technologies, such as real time reporting, shared utilities, or application programme interface (API) architecture, can help facilitate the streamlining of banks’ submission of applications, payment settlement, and securities clearing.
- Rule and Process Changes – Implementing new rules and processes to encourage and allow innovative solutions to regulatory compliance issues, both for the regulator and for industry This could include defining new regulation in a machine-readable format that can be applied automatically; or adjusting a handbook to accommodate the application of new technology such as blockchain compatible data protection or identity rules.
Commenting on the report, Daniel Morgan, Director of Policy and Regulation at Innovate Finance said:
“The first wave of RegTech has focused on market driven process automation in the face of ever increasing costs of compliance for financial institutions. The second wave of systems evolution will also fundamentally reduce the cost and burden of regulation and will require a radical rethink of regulatory processes.”
Lawrence Wintermeyer, CEO of Innovate Finance, said:
“Regulators are already making this transition and while this future is some years from becoming reality, only by pursuing a holistic approach to technology-enabled regulation will regulators move beyond adapting and automating existing practices and start to reimagine rules and process fit for a digital age.”
Richard Schaberg, partner and head of Hogan Lovells U.S. Financial Institutions Practice Group, said:
“FinTech, RegTech, and innovation, generally, have the potential to radically transform the U.S. and global financial systems. U.S. regulators have, so far, remained more cautious than some of their international counterparts in embracing technological innovation in financial regulation. The Report provides insight into the international efforts to encourage and deploy new ideas and techniques for regulatory compliance and outlines the steps the U.S. can take to fully integrate the evolving and essential features of RegTech into our own systems.”
About Innovate Finance
Innovate Finance is an independent membership association that represents the UK’s global FinTech community. Founded in 2014 with the backing of the City of London and Canary Wharf Group, Innovate Finance is a not-for-profit that aims to accelerate the country’s leading position in the global financial services sector by directly supporting the next era of technology-led financial services innovators, whether they be a young startup or an established industry player.
Their goal is to create a single point of access across the sectors to help foster enabling policies, regulation, talent development, business growth opportunities and investment in the UK – and, most importantly, to create a global finance sector that offers services that are more sustainable, more inclusive and better for everyone.
About Hogan Lovells
Hogan Lovells offers extensive experience and insights gained from working in some of the world’s most complex legal environments and markets for corporations, financial institutions, and governments. We help you identify and mitigate risk and make the most of opportunities. Our 2,500 lawyers on six continents provide practical legal solutions wherever your work takes you. We’ve been at the heart of innovation within the financial institutions and insurance sectors for many years, working on a range of developments from the UK’s first ever debit card, to one of the world’s first peer to peer lending platform, and the launch of the first global, mobile, contactless payments solution.
For further information, contact
Daniel Morgan, Director of Policy and Regulation
Georgia Hanias, Head of Global Communications
Maria Woehr, Public Relations Manager
+1 (212) 918 6154
Rachael Warren, Senior Public Relations Adviser
+44 207 296 2780