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MDEC Fintech Conference - Facilitating Innovation Through The Fintech Regulatory Sandbox, Bank Negara


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MDEC Fintech Conference - Facilitating Innovation Through The Fintech Regulatory Sandbox, Bank Negara

  1. 1. Fintech Regulatory Sandbox Discussion Paper 1 Aznan Abdul Aziz Chairman of the Financial Technology Enabler Group (FTEG) Bank Negara Malaysia
  2. 2. Fintech and the regulatory spectrum 2 Too small to care Too large to ignore Too big to fail “Large” also includes “significant” and “interconnected”
  3. 3. The Sandbox explained 3 Build (almost) anything you want In a safe environment, with clear boundaries and safeguards We may relax some (but not all) of our rules Consequences of failure can be contained
  4. 4. Our motivation for introducing the Sandbox 4 • Promote innovation • Remove regulatory barriers or uncertainty • Lower cost of testing new ideas • Faster time to market • Fine-tuning of products/solutions prior to launch • Evaluate impact and monitor unintended consequences • Reduce risk and contain the consequences of failure • Review our regulations
  5. 5. Key features of the Sandbox 5  3 key components of regulatory sandboxes:- - Eligibility criteria : Filtering mechanism to ensure only deserving candidates are processed and approved for sandbox deployment - Safeguards : To reduce risk and contain the consequences of failure. To be proposed by the applicant, modified or enhanced as appropriate by the Bank - Regulatory flexibilities  Regulatory sandboxes cannot be used to circumvent existing regulations, and are therefore not suitable for activities/solutions that are already allowed under existing regulations.  In addition to regulatory sandboxes, the Bank will also provide ‘informal steer’ to guide individual FIs/Fintech companies.
  6. 6. Eligibility Criteria 6  The solution is genuinely innovative  The deployment of the solution is:  Not allowed due to any prohibition under existing laws or regulations; or  Either wholly or partly incompatible with applicable regulatory requirements  The solution has clear potential to:  Contributes to development of Malaysia’s financial sector;  Brings enhancement to financial institution’s efficiency or risk management and controls; or  Significantly benefits the Malaysian economy and/or consumers  Due diligence was conducted to verify the viability of the solution and the associated risks  Applicant has the resources to mitigate and control potential risks and losses arising from the offering of the solution  The solution is planned to be offered commercially in Malaysia after the Sandbox
  7. 7. Other requirements 7 Caveat: In addition to the safeguards proposed or offered by the applicant, the Bank may impose additional safeguards as the Bank sees fit Examples of Safeguards  Adequate disclosure of the potential risks to participating customers and confirmation of their understanding of the attendant risks  Limiting individual and/or aggregate value or frequency of transactions  Restricting participation to targeted customers and duration of the testing period  Availability of consumer redress mechanism and adequate resources to undertake the testing and contain the consequences of failure Caveat: Additional conditions may be imposed by the Bank on the participants taking into account risks peculiar to the respective test Minimum Standards  Maintain adequate oversight and control arrangements  Maintain appropriate risk management systems and processes  Have in place appropriate customer protection safeguards  Have adequate financial capability
  8. 8. 8 Questions and feedback welcomed … except on P2P lending :)