Institutional Arrangements for Fintech Regulation: Supervisory Monitoring

Fintech Notes, June 26, 2023

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Institutional Arrangements for Fintech Regulation: Supervisory Monitoring

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Bibliographic details

• Authors: Parma Bains, Caroline Wu
• Published: June 26, 2023
• Series: Fintech Notes
• DOI: https://doi.org/10.5089/9798400245664.063

Summary

• Authors: Parma Bains, Caroline Wu
• Date: June 26, 2023
• Core observation: The impact of fintech is growing rapidly worldwide, although this growth is uneven across jurisdictions.
• Primary institutional approaches to fintech encountered:
  • Passive approach of monitoring fintech.
  • Capturing new business models in existing regulatory frameworks.
  • Developing bespoke regulation.
  • Adopting test and learn policies through institutional arrangements like innovation hubs and sandboxes.
• Test and learn approach: Relatively unique to fintech in financial regulation and supervision; has advantages and disadvantages depending on design and use case.
• Policy objective identified: Authorities should aim to consider fintech regulation part of the mainstream, embedding fintech expertise throughout an organization rather than siloing it in specific fintech units.

Key findings and observations

• Fintech growth is uneven across jurisdictions.
• The appropriate institutional response depends on the effect of fintech in the jurisdiction.
• The test and learn approach (innovation hubs, sandboxes):
  • Can help authorities monitor and respond to fintech challenges in some scenarios.
  • Could lead to risks to consumers and markets in other scenarios, particularly when designed poorly or with an unclear use case.
• Embedding fintech expertise across supervisory organizations is presented as the ultimate aim, to avoid siloing in specific fintech units.

Policy implications and recommendations

• Choose institutional arrangements according to fintech’s local effects, selecting among:
  • Passive monitoring,
  • Integration into existing frameworks,
  • Bespoke regulation,
  • Test and learn arrangements (innovation hubs, sandboxes).
• Exercise caution with test and learn arrangements:
  • Ensure clear use cases and robust design to mitigate consumer and market risks.
• Pursue mainstreaming of fintech regulation:
  • Embed fintech expertise throughout the supervisory organization rather than isolating it in dedicated fintech units.

Publication and metadata

• Publication title: Institutional Arrangements for Fintech Regulation: Supervisory Monitoring
• Series: Fintech Notes No 2023/004
• Issue: 004
• Volume: 2023
• Pages: 58
• DOI: https://doi.org/10.5089/9798400245664.063
• Stock No: FTNEA2023004
• ISBN: 9798400245664
• ISSN: 2664-5912

Institutional Arrangements for Fintech Regulation: Supervisory Monitoring — Parma Bains, Caroline Wu, June 26, 2023.

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