Fulfilling its mandate under the European Commission's FinTech Action Plan to map the current authorization and licensing approaches for innovative FinTech business models in Europe, the European Banking Authority (EBA) has published a report on the regulatory perimeter, regulatory status and authorization of FinTech activities under its remit, in particular the banking, payment services and electronic money services sectors. The European Securities and Markets Authority published its related report on July 12, 2019.
The report sets out the outcome of the EBA's analysis of the areas and discusses future steps that the EBA will be taking to address any identified issues, a summary of which is provided here.
- Regulatory perimeter: the EBA found that there has been very little legislative action by EU Member States to broaden or adjust the regulatory perimeter of their financial sector regulators. Only one Member State has extended the national regulator's remit and that was for crypto assets only and another Member State had proposed legislation to extend the regulator's remit to cover crowdfunding service operators. Noting its previous report on crypto-assets and the proposed EU Regulation on crowdfunding service operators, the EBA states that it does not have any further recommendations at this stage. The EBA will continue to monitor for any further developments.
- National regulatory status: the EBA's analysis focused on firms that fall outside of the regulatory perimeter to assess whether any action was needed to change their status. The EBA observed that many institutions had become subject to the second Payment Services Directive (also known as PSD2) and that the activities of other firms were ancillary or non-financial in nature and did not warrant regulation. The EBA will continue to monitor this area.
- National approaches to authorization: the EBA considered the approach to authorizations under the Capital Requirements Directive (CRD), PSD2 and the Electronic Money Directive, in particular how regulators had adopted a proportionate and flexible approach to FinTech firms. The EBA found that regulators are utilizing the proportionality options provided for under PSD2, but will continue to monitor this area, focusing on the flexibility of regulators in fast tracking authorization of FinTech firms. The EBA also evaluated the extent to which national regulators attach conditions or restrictions to authorizations. The EBA observed that national regulators use these options most for the authorization of banks under CRD, in particular the options around the initial capital required for authorization. The EBA considers that CRD provides sufficient flexibility to allow regulators to adopt a proportionate approach to FinTech firms and it does not believe that changes to CRD are needed at this time, although it will further monitor the approaches to initial capital. In addition, the EBA noticed that national regulators use different methods for their approach and, in its view, work is required to ensure a more convergent approach is adopted across the EU.
