The first attempt to regulate the fintech and cryptocurrency industry by the ECB

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Bank and Fintech bank licensing

The first attempt to regulate the fintech and cryptocurrency industry by the ECB

Introduction

The European Central Bank (ECB) today launches a public consultation on two draft guides which explain the process of how entities can become banks and obtain a banking licence.

The first document, the draft guide to assessments of licence applications, sets out the general process and the requirements for the assessment of such applications.

The second document, the draft guide to assessments of fintech credit institution licence applications, is directed at entities with a fintech business model which are considering applying for a banking licence. Both guides aim to make the application process more transparent and help applicants in their preparations. 

The national competent authorities act as the first contact point for receiving licensing applications. However, the assessment of banking licence applications is conducted jointly with the ECB, which is the competent authority for making the final decision to grant, extend or withdraw a banking licence in the euro area.

What are the new requirements for fintech?

In the euro area, an increasing number of entities entering the financial sector have business models based on innovative technology – commonly known as fintech. This phenomenon is addressed by the draft guide to assessments of fintech credit institution licence applications.

The ECB, recognizing the increasing presence of such operations makes a first attempt in licensing and regulating fintech operations. The consultation draft is focusing on increased liquidity requirements recognizing the volatility of its activity

Nouy's point of view as reported by Reuters (click here)

“At the ECB, we are, for instance, devising a guide on licensing that also covers fintechs,” Ms Nouy told a conference. “This guide will be published shortly for the purpose of a public consultation.”

“The technical and financial hurdles have become a bit lower; the (banking) market has become more contestable,” Ms Nouy added.

The nascent industry, ranging from mobile payment apps to ‘cryptocurrencies’ like bitcoin, is seen playing a crucial role in the future of financial services but regulators are still searching for ways to properly supervise a sector that has largely flown under their radar.

How Deloitte can help?

Deloitte can help you develop effective solutions linking the design and strategy of the fintech with licensing and supervisory standards in EU. Capital and liquidity requirements combined with the necessary investment for adequate risk management framework, are elements that define the necessary investment and consequently the feasibility of the venture and ROI

Please feel free to request a free workshop with our team 

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