The increasingly collaborative regulator
It’s not only financial institutions that are eager to diversify their tech portfolio, financial regulators are also anxious to keep up and have shown a keen interest in working with the market.
A call for evidence issued by the UK government in July 2019 set out to investigate how the various UK regulators currently work together and, moving forward, how they can develop a regulatory framework to enhance the relationships between regulators, the regulated firms and technology.
It also provided a Sandbox environment for financial services providers and the Regulator to work together. So far these have been to solve specific issues, but the route ahead is clear; the industry must work as a cohesive whole to make the market as safe as it can be, through the provision of effective regulation that the industry can implement in a watertight way. This transcends borders and jurisdictions – regulators across the globe must work in harmony to ensure cohesive regulatory scrutiny.
Regulators are also looking at how they can apply technology to their own processes. RegTech enables regulators to keep pace with the technology employed by financial institutions. Using the same technology gives rise to better communication between industry and regulator and promotes a shared sense of purpose in working towards safer markets.
So, while RegTech provides the means for overburdened firms to provide regulators with the data they require in a way that is better, faster, cost efficient and safer for all, the inverse is also true.
In a new market paradigm, where financial institutions are dealing with more third-party providers and the data that this entails, they need to ensure their systems are fit for purpose and able to deal with data safely and effectively. Not being able to evidence this makes for a firm that customers and the market itself would not want to work with.