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Regulatory sandboxes, innovation hubs

Regulatory sandboxes, innovation hubs

​ESBG says innovation facilitators should be subject to a common approach to prevent unfair competition, regulatory arbitrage

BRUSSELS, ​24 May 2019 –​ Similar risks, similar regulation. Firms that deal with FinTech only should not benefit from a separate regime, but instead there should a broadening of the existing regime that already regulate financial incumbents, ESBG argues in a recently published position paper on the regulatory treatment of innovation facilitators. 

This issue becomes of particular sensitivity when dealing with these FinTech tools, considering the fact that the possibility to access to regulatory sandboxes and innovation hubs might grant a considerable advantage. The association representing savings and retail banks in Europe notes, therefore, that the problem associated with regulatory sandboxes and innovation hubs (and similar regimes) consists mainly in the lack of a common approach and responses to regulatory and supervisory issues. To address the problem, ESBG suggests that the following actions be considered:

  • A clear EU framework and mechanisms established with clearly defined rules, based on the following features:(i) ensuring a level playing field amongst firms using FinTech and those that are not, and amongst different firms, regardless of their nationality the industry they belong to or their dimension/scale; (ii) granting consumer protection and financial stability, and (iii) applying the principle in supervision ‘similar risks - similar treatment.’

  • Regulatory sandboxes should be open to every kind of FinTech firms, including not only newly founded financial institutions, but also incumbent institutions and technology provider; 

  • As access to sandboxes and innovation hubs give both operation and regulatory advantages to firms using them, selection criteria for sandboxes and innovation hubs need to undergo a thorough discussion involving firms and authorities. 

  • To ensure a level playing field with those outside the sandbox, transparency on the results of the test should be ensured.

>> Read position paper

Innovation; Innovation Hub; European Supervisory Authorities (EBA-ESMA); European Institutions