European Commission: Post-Crisis Regulation Must Focus on Fintech

While delivering the keynote speech at the this year’s European Securities and Markets Authority (Esma) conference on October 17 in Paris, Dombrovskis said that the continuous evolution of the financial markets meant that new elements such as fintech and green finance required new methods of regulatory supervision.

“Europe has what it takes to develop a globally competitive fintech sector,” he said. “But fintech firms need coherent regulation to scale up and take full advantage of the single market. In our review, we give the European Supervisory Authorities (ESAs) a strong coordinating role for national fintech initiatives, such as innovation hubs and regulatory sandboxes.”

Emerging technologies such as blockchain and distributed-ledger technology (DLT) have posed regulatory bodies significant questions as to how they should be regulated despite the industry pushing ahead with various development projects.

One such method has been the establishment of regulatory sandboxes where fintech firms are able to test new technologies or models within a low-risk, controlled environment with oversight from regulatory bodies, which can then be evaluated prior to industry adoption.

Dombrovskis’ sentiments on fintech-focused supervision were echoed by other speakers during the event. Olivier Guersent, director general of the European Commission, said that it was time to “move beyond financial crisis regulation to post-crisis regulation, most notably in new areas like fintech.”

While delivering the closing remarks at the one-day conference, Ashley Alder, chair of the International Organization of Securities Commissions (Iosco), said that while the post-crisis reforms such as Mifid II have been successful in increasing stability for financial systems, he questioned whether such rules would protect markets and their  participants against new risks caused through the development and introduction of technology.

Dombrovskis also confirmed that there would be no further delays to the introduction of Mifid II, following industry calls to postpone the implementation of the new regulatory regime until Monday 8, January. It appears as though market participants are “uncomfortable” moving to the new regulatory dispensation on January 3—a Wednesday—instead arguing that the move would be preferable the following Monday.  

“The deadline for Mifid II was already extended once, so we do not plan further extension of the deadline,” he confirmed.