The FCA is joining up with other global regulators to create an international sandbox to help improve regulation and make innovation safer.
Regulators face two big challenges: they want to facilitate cross border collaboration and they want to strike a balance between providing safe regulation without stifling innovation. To that end, the FCA announced this month that it was working with counterparts from 11 countries to create a global regulatory sandbox.
Among the organisations taking part are: Abu Dhabi Global Markets; the Australian Securities & Investments Commission, the Central Bank of Bahrain and the United States Bureau of Consumer Financial Protection. Together they will create the Global Financial Innovation Network (GFIN) to make it easier and quicker for firms to communicate with regulators, try out new ideas and get to grips with regulatory frameworks in different countries.
It will also create a place for international regulatory collaboration where organisations can pool resources, share ideas and develop scalable solutions for the future.
Speaking about the project, Christopher Woolard, the FCA’s Executive Director of strategy and competition, said: “The creation of the Global Financial Innovation Network is an important next step for organisations like ours who are actively engaged in understanding and harnessing the benefits of innovation in financial services for consumers, while managing the potential harm.”
“The establishment of the GFIN can help share the experiences and knowledge from across different markets, while also providing a platform for innovative firms wishing to scale their propositions via testing in multiple countries.”
The project mirrors the FCA’s own successful regulatory sandbox which it launched back in 2015. This was a place where companies could communicate with regulators, and offered a safe place to trial innovative new products without the fear of regulatory backlash.
The programme helped to take some of the fear factor away from innovation and improve the flow of information between the sector and the regulators. It has helped firms understand what regulators are looking and their obligations and by so doing plugs directly into the FCA’s goals of placing prevention over cure.
The sandbox is being promoted as an attempt to bring outdated infrastructure into the 21st century. Today’s economy is fast moving and international, but some of the protocols companies work by are lagging behind. This new project aims to create a platform where products can be scaled and information can be shared among all parties. It would enable companies to trial innovation in several countries at the same time and will also make it easier for regulators to spot common problems and plug these into their forward planning strategies.
The project is currently open for consultation. An earlier initial consultation produced approximately 50 responses, most of which were favourable. This ongoing consultation will seek comments on the GFIN’s mission statement, proposed functions and where it should focus its activity. They also say they are open to any other regulators or organisations which would like to get involved. Any feedback or questions should be sent back to the group by October 14th 2018.