On 23 October 2018, the European Banking Authority ("EBA") published its detailed annual work programme for 2019, describing its specific activities and tasks for the coming year and highlighting its key strategic areas of work.

In 2019, the EBA will focus on five high level priorities:

  1. leading the Basel III implementation in the EU;
  2. understanding risks and opportunities arising from financial innovation;
  3. collecting, disseminating and analysing banking data;
  4. ensuring a smooth relocation of the EBA to Paris; and
  5. fostering the increase of the loss-absorbing capacity of the EU banking system.

The EBA's initiative fits with the European Commission's broader efforts to build a Capital Markets Union and a true single market for consumer financial services, and with the European Commission's action plan on Fintech, which was published in March 2018.

EBA & financial innovation

In its annual work program, the EBA acknowledges that financial innovation offers great opportunities but also introduces new risks and challenges, having the potential to transform the financial system across a broad range of products and services.

Financial technology will affect many aspects of banking, such as business models and consumer interaction, reporting and compliance (including anti-money laundering), and the development of new financing.

FinTech Roadmap

The EBA already had a FinTech Roadmap in place, approved by the Board of Supervisors in February 2018.

The Roadmap, amongst other things, sets out the establishment of a FinTech Knowledge Hub to enhance knowledge sharing and foster technological neutrality in regulatory and supervisory approaches. By setting up the EBA FinTech Knowledge Hub, the EBA facilitates information and experience sharing, to raise awareness and to support the transfer of knowledge on FinTech.

The EBA's FinTech Roadmap describes its priorities for 2018/2019. These priorities are:

  1. monitoring the regulatory perimeter, including assessing current authorisation and licencing approaches to FinTech firms, and analysing regulatory sandboxes and innovation hubs in order to identify a set of best practices to enhance consistency and facilitate supervisory coordination. These regulatory sandboxes allow regulators to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks;
  2. monitoring emerging trends and analysing the impact on incumbent institutions' business models and the prudential risks and opportunities arising from the use of FinTech;
  3. promoting best supervisory practices on assessing cybersecurity and promoting a common cyber threat testing framework;
  4. addressing consumer issues arising from FinTech, in particular in the areas of unclear regulatory status of FinTech firms and related disclosure to consumers, potential national barriers preventing FinTech firms from scaling up services to consumers across the single market, and the appropriateness of the current regulatory framework for virtual currencies;
  5. identifying and assessing money laundering/terrorist financing risks associated with regulated FinTech firms, technology providers and FinTech solutions.

By stimulating discussions among the regulators, rather than prosing any particular policies for now, the European regulators play an important role in creating a regulatory environment where new initiatives are promoted whilst at the same the related risk are effectively managed. Similar to the European Supervisory Authorities (the EBA, EIOPA and the ESMA), the national supervisory authorities also acknowledge the changes and threats relating to financial innovation and have taken similar actions to foster innovation and to ensure effective supervision of new initiatives.

It is promising that the European Commission, the EBA, the ESMA and the national regulators realise that Fintech innovation is an important part of the global financial system and that they provide for regulatory certainty, thus encouraging investments in the FinTech sector.