The European banking supervisory authority intends to monitor the rapidly growing market of young finance companies even more closely in the near future. It wants to ensure that FinTechs that are offering banking services are duly licensed, that risks can be adequately assessed, and that they meet the same standards as traditional banks.

Digitalization and the associated rise of financial technology companies (FinTechs) have an enormous influence on the financial world since they offer very specific services and no longer cover the entire range of traditional banking business. Technical and financial barriers to market entry continue to be lowered. In many countries, the scope of FinTechs has so far been greater than that of strictly regulated financial institutions, which is why the financial sector has long been calling for a closer look at FinTechs.

Following public consultations, the ECB published its expected guides on banking licensing and admission as a FinTech credit institution on September 21, 2017. The two guides explain how companies are able to start their banking business and what requirements they must meet in order to obtain a banking license.

The first draft guide on the assessment of licensing applications relates to the general licensing procedure for credit institutions. The second draft guide on the assessment of licensing applications as a FinTech credit institution is specifically aimed at companies with a FinTech business model that intend to apply for a banking license. The second guide uses the term “fintech credit institutions” to designate companies with bank business models in which the production and delivery of banking products and services are based on technology-enabled innovation.

The two draft guides are available at the following links:

https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/licensing_and_fintech/ssm.guide_to_assessment_of_credit_institution_licensing_applications_draft.en.pdf

https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/licensing_and_fintech/ssm.guide_on_assessment_for_licensing_of_fintech_credit_insts_draft.en.pdf

The current consultation will end on November 2, 2017 until which time organizations will have the opportunity to submit their comments to the ECB. According to the ECB, a second consultation phase will then follow in which the amendments to these draft guides will be discussed.