FinTech: Regulatory sandboxes and innovation hubs

In recent years competent authorities in the EU have adopted various initiatives to facilitate financial innovation. These initiatives include the establishment of ‘innovation facilitators’. Innovation facilitators typically take the form of ‘innovation hubs’ and ‘regulatory sandboxes’. Innovation hubs provide a dedicated point of contact for firms to raise enquiries with competent authorities on FinTech-related issues and to seek non-binding guidance on regulatory and supervisory expectations, including licensing requirements. Regulatory sandboxes, on the other hand, are schemes to enable firms to test, pursuant to a specific testing plan agreed and monitored by a dedicated function of the competent authority, innovative financial products, financial services or business models.
In this report the European Supervisory Authorities (the ESAs) set out a comparative analysis of the innovation facilitators established to date in the EU, further to the mandate specified in the European Commission’s March 2018 FinTech Action Plan.The ESAs also set out ‘best practices’ regarding the design and operation of innovation facilitators, informed by the results of the comparative analysis and the experiences of the national competent authorities in running the facilitators. The best practices are intended to provide indicative support for competent authorities when considering the establishment of, or reviewing the operation of innovation facilitators. Accordingly, the best practices are intended to promote convergence in the design and operation of innovation facilitators and thereby protect the level playing field. The ESAs also set out options, to be considered in the context of future EU-level work on innovation facilitators, including in conjunction with the European Commission’s future work, to promote coordination and cooperation between innovation facilitators and support the scaling-up of FinTech across the EU. These options comprise:
• the development of Joint ESA own-initiative guidance on cooperation and coordination between innovation facilitators;
• the creation of an EU network to bridge innovation facilitators established at the Member State level.
The ESAs will continue to monitor national developments regarding innovation facilitators and take such steps as are appropriate to promote an accommodative and common approach towards FinTech in the EU.