Updated: October 2019
ESBG is in favour of a clear EU framework with clearly defined rules. This could avoid the fact that several
supervisors cannot establish a regulatory sandbox as they are only mandated to supervise compliance and
not allowed to make any exemptions from the law.
The guiding principle governing FinTech supervision, inside and outside of regulatory sandboxes, is that similar
risks should always attract similar regulatory treatment. In this sense, the regulatory regime should not differ
depending upon the type of entity delivering the FinTech service. Additionally, ESBG believes that a regulatory
sandbox should not discriminate specific types of entities and be open to newly founded entities and incumbent
institutions and technology providers alike.
They should even enhance cooperation between
established firms and financial start-ups.
An adequate set-up of the supervisory
cooperation in this matter is of the utmost
importance; as access to sandboxes and
innovation hubs give both operational and
regulatory advantages to firms using them,
the selection criteria for entering sandboxes and
innovation hubs need to undergo a thorough
discussion involving firms and authorities.
In addition, to ensure a level playing field with
those outside the sandbox, transparency on the
potential regulatory outcome resulting from
the test should be ensured.
According to the European Supervisory
Authorities, it is possible to define:
a regulatory sandbox as: ‘a scheme set up
by a competent authority that provides
regulated and unregulated entities with the
opportunity to test, pursuant to a testing plan agreed and monitored by a dedicated function of the relevant
authority, innovative products or services, business models, or delivery mechanisms, related to the carrying
out of financial services’; and
an innovation hub as ‘a scheme whereby regulated or unregulated entities can engage with competent
authorities on FinTech-related issues and seek non-binding guidance on the conformity of innovative financial
products, services, business models or delivery mechanisms with licensing, registration and/or regulatory
Jointly the two of them, together with other regimes, are also called ‘innovation facilitators’.
The Commission initiated their policy development for innovation facilitators in its ‘FinTech Action Plan’,
published in March 2018, which provided for specifications to be taken in this field. The ESAs’ later published
a Joint Report in January 2019, named ‘FinTech: Regulatory sandboxes and innovation hubs’, in which they
set out a comparative analysis of the innovation facilitators and ‘best practices’ regarding their design and
operation of innovation facilitators. The Report also highlights options, to be considered in the context of future
The Commission is now expected to publish a blueprint based on the Joint Report. In the meantime,
the Commission launched the European Forum for Innovation Facilitators (‘EFIF’), where stakeholders can
exchange views and practices.
ESBG welcomes the initiative of the European Commission to launch the EFIF. However, even though
remarkable, ESBG considers such an initiative insufficient to harmonize policy at EU level, as the EFIF is merely
a forum to exchange best practices between financial regulators and supervisors and private operators, making
it insufficient in the strive for a level playing field and the avoidance of regulatory arbitrage between Member
States. It does not involve other supervisors and regulators which usually act in different frameworks, such as
those dealing with cybersecurity and/or data protection (e.g. ENISA, EDPB, etc.).
On the same note, ESBG believes that the approach adopted so far by the Commission favours a fragmentation
of the regulatory framework, as it takes into account only regulators and supervisors belonging to the financial
services regulatory framework, without considering the need to involve also the mentioned supervisors and
regulators acting in different frameworks.
Innovation facilitators – such as regulatory
sandboxes and innovation hubs – can facilitate
the creation of an EU single financial services
market. There is a need for common approaches
and responses to regulatory and supervisory
issues relating to innovation facilitators in order to
prevent discrepancies and an uneven level playing
field and enable EU operators to act consistently
on the international scene. Varying approaches
and competition between national authorities can
lead to regulatory arbitrage.
Similar risks should always attract similar
regulatory treatment. In this sense, the regulatory
regime should not differ depending upon the type
of entity delivering the FinTech service and
both incumbents and newcomers should be
considered for entry.