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The FCA’s Technology Agenda for 2018/19: Business as Usual as the FCA looks abroad

The FCA’s Technology Agenda for 2018/19: Business as Usual as the FCA looks abroad

  • United Kingdom
  • Financial institutions
  • Financial institutions - Digital Financial Services

19-04-2018

The Financial Conduct Authority and the Prudential Regulatory Authority have both recently released their business plans for the year ahead. Interestingly, both plans mention the importance of technology for the year ahead.

The FCA business plan

The FCA recognises that technology plays a pivotal role in delivering financial products and services, however warns that new technologies can lead to harm if they are not safely adopted and managed. This includes the FCA requiring firms to ensure resilience to cyber-attacks, data security, and proper management of outsourcing, and the FCA shall look at firms’ ability to keep systems running in the event of major operational problems.

The FCA continues to support tech, for example because of its potential to provide improved pricing, access and service for consumers. The FCA highlights its work though the FCA Innovate programme and the FCA sandbox. Interestingly, the FCA also states that its concept of a global sandbox has proven popular, especially for start-ups who are keen to expand internationally, and over next few months the FCA will work with interested regulators on a blueprint of the global sandbox. For further information on the global FCA sandbox, please see here.

The FCA also highlights some of the work it is doing with technology, including:

  • the development Regtech solutions using automation
  • reviewing the core differences between emerging and traditional retail banking business models, in particular the growing use of digital channels
  • developing additional rules to address areas of concern, in particular for loan-based crowdfunding
  • developing its thinking on cryptocurrencies, and in particular the FCA will publish a Discussion Paper later this year outlining its policy thinking on cryptocurrencies

The FCA also indicates that it will review the use of data by financial services firms, including machine learning analysis of big data pools, algo trading and wider artificial intelligence. The FCA business plan can be found here.

The PRA business Plan

The PRA focusses less on Fintech, reflecting its role as a prudential authority. However, the PRA does indicate that it plans to leverage and develop existing capability to provide improved management information to support its assessments of firms.

The PRA recognises that this will be underpinned by continued incremental improvements to data storage and analytics, and as such the PRA will undertake work to identify whether the application of new machine learning techniques would further improve the efficiency of its operating procedures. The PRA business plan can be found here.

Comment

Generally, it is business as usual for the FCA and PRA. Interesting, however, is the fact that the FCA is now taking a more international approach towards its regulatory duties, as shown by the global sandbox.

This reflects the global nature of many Fintech propositions. Also interesting is the recognition by both regulators of the role of technology in helping fulfil regulatory obligations, either in terms of its use by firms, or in the case of the PRA in terms of the regulator fulfilling its own regulatory obligations.

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