RegTech: the state of the market, future developments and how Citi is influencing global policymakers on innovation

1. Sophia Bantanidis, EMEA Head of Regulatory & Market Strategy
RegTech: the state of the market, future developments and how Citi is
influencing global policymakers on innovation
October 2017, Zürich, PPI TopEvent
Treasury and Trade Solutions

2. 2 Global Regulatory Overview 2017
Agenda
·Introduction
·RegTech & FinTech
– The regulatory tsunami
– Definitions and examples
– Trends and investments and challenges
·Shaping an innovative policy framework
·Concluding remarks

3. The Global Regulatory Tsunami
The pace of regulatory change continues and
requires an increasing number of resources
just to keep up with ongoing and new
developments
General risk of overlaps and inconsistencies
in regulatory developments across the globe:
concerns around non-level-playing field;
fragmented approach challenges global
operating model of banks and global
corporations
Increasing focus on regulatory developments
with extraterritorial impact which increases
the compliance complexity
These developments have opened the door
for technology to help firms more quickly
respond to, anticipate and comply with
regulatory change
US Measures
Dodd Frank Act
Financial Stability/Basel III and
Orderly Resolution Planning
Volcker Rule
OTC derivatives
Cybercrime measures
Compensation/ Whistle blowing/Mkt
Abuse
Investor protection
AML/KYC
FATCA
Future plans for faster payments
Sarbanes-Oxley controls
EU Measures
Banking Union and ECB supervisory powers
Payments Services Directive II (PSD2)
Network & Information Security (NIS) Directive
ESM & Liikanen ring-fenced entities
CRD III & IV & V
Depositor Guarantee Schemes Directive
AML4/FATF
OTC derivatives (EMIR)
AIFMD
UCITS V/VI
MiFIR/MiFID II
CSDR
Shadow Banking Regulation/ MMF reform
Financial Transaction Tax (EU FTT)
Capital Markets Union
Data on-shoring (Russia)
Asia-Pacific Measures
Basel III
OTC Derivatives
New Investor protection (HK/SG/esp. AU)
Market Abuse/Insider Trading (HK/SG/AU/IN/MY)
HFT vigilance (HK/AU)
HK Multi-currency Clearing
AML/KYC
Asia Region Funds passport (for APEC countries)
Data on-shoring (China, Indonesia …)
Asia Infrastructure Investment Bank
Global Measures
Basel III & IV
TLAC
Recovery & Resolution Planning
OTC derivatives
FSB/Shadow Banking
AML/OFAC ATF/ABC
International Payments Framework
eInvoicing / eGovernment
BCBS data measures
BEPS
UK Measures
Vickers ring-fenced entities
FSA/FCA reviews: mis-selling and outsourcing
Depositor Protection LIBOR Remediation
Conduct Risk
New Payments Systems Regulator
Senior Managers Regime
Multiple global, regional and local regulationsand extra-territorial complications - against a backdrop of challenging macro
economic environment and geopolitical uncertainty
Global Regulatory Overview 20173

4. 4 Global Regulatory Overview 2017
RegTech and FinTech- Starting Point
·Both terms remain undefined in any rulebook. Referenced and explained by regulators and global
standard settingbodies. Broad consensus that RegTech is a subset of Fintech
·“FinTech describes technology-enabled innovation in financial services, regardless of the nature
or sizeof the provider of the service”. European CommissionConsultation on FinTech, March
2017. FinTech is defined as technology-enabled innovation in financial services that could result in
new business models, applications, processes or products with an associatedmaterial effect on
the provisionof financial services. Financial Stability Board, Financial Stability Implications from
FinTech, June 2017
·“RegTech is a sub-set of FinTech that focuses on technologies that may facilitatethe delivery of
regulatory requirements more efficiently and effectively than existingcapabilities.” FCA FS16/4 Call
for input on supporting the development and adopters of RegTech, July 2016
Are they defined?
Are they regulated?
·It depends on their business model
– Some FinTech services areregulated whilst others are not regulated
– RegTech firms generally do not offer regulated services

5. 5 Global Regulatory Overview 2017
FinTech Examples

6. 6 Global Regulatory Overview 2017
RegTech Examples
• Following the financial crisis we see RegTech as a huge cost take-out opportunity for financial
institutions
• The U.K. and U.S. are leading in RegTech globally
• Just like the FinTech solutions, RegTech products consist of a diverse business models targeting
different regulations
• For the moment RegTech companies seem to be focusing on the easier-to-tackle areas e.g.
regulatory reporting and KYC, which both simplify existing processes and reduce manual inputs
• Similar to FinTech, some RegTech solutions deploy distributed ledger technology (DLT)

7. 7 Global Regulatory Overview 2017
Investment trends (1 of 2)

8. 8 Global Regulatory Overview 2017
Investment trends (2 of 2)

9. 9 Global Regulatory Overview 2017
Key themes setting the tone for the future
1. Regulatory excitement (with RegTech and FinTech now forming
part of the regulator’s DNA) coupled with industry excitement
2. The development of regulatory and industry ‘sandboxes’
3. Open data access activity: well advanced in the EU and in the UK
and new lobby group is pushing for similar developments in the
U.S
4. Large firms entering the RegTech arena- could they be starting to
set an industry-wide standard?
5. A focus on financial inclusion and how RegTech can help
6. Investment shift from B2C to B2B

10. Regulatory, Market & Innovation Strategy: Policy perspective
Defining Financial
Technology
(“FinTech”)
At present the term “FinTech” is undefined in any rulebook. FinTech is not reserved to ‘emerging’ technology businesses;
the incumbent financial industry is also a key provider of FinTech solutions.
Caution Against
Rushing to
Regulate
A better understanding is required (both by regulators, the regulated and the non-regulated) of what the different innovative
technologies can deliver (how financial firms can deploy it), strengths, weaknesses, to what degree these could introduce
new risks etc. Where technology intersects with regulated processes and changes roles/responsibilities of regulated actors
or the ability to supervise them, or creates legal uncertainty, existing laws may need to be future-proofed.
• One of the ways to drive forward this learning process is via so called ‘regulatory sandboxes’
Engagement with
FinTechs
Engagement and transparent communication is key, as many technology Start-ups may develop services that fall into the
regulated space, without knowing it. Taylor-made licenses for these types of FinTechs may be appropriate as long as the
level-playing-field is maintained.
Global Policy
Consistency
Finance is an international cross border business and many emerging FinTech business models already operate across
borders
• It is therefore critical for regulators to work together on a global scale to see how these business models intersect
with local regulation and to align regulation so that regulatory arbitrage can be avoided
Self regulation /
Guidelines
With respect to blockchain / DLT the way for self regulation has already been paved and this is an area that the financial
and emerging FinTech industries shape alongside regulators
• The International Organization for Standardization (ISO) backing the Australian government’s proposal to develop
new international standards on blockchain. These standards are aimed at providing common language for industry,
policy makers, regulators and technology developers and will be developed by an international technical committee
led by Standards Australia. The committee will include 35 ISO members.
10
Any future policy should be developed along the following principles:
1) Digitally friendly;
2) Technology / platform neutral;
3) Providing legal certainty;
4) Ensuring a level-playing-field;
5) Be proportionate.
6) Product / service orientated

11. 11 Global Regulatory Overview 2017
Concluding remarks
• We are excited about the potential of RegTech and FinTech….and
the excitement will continue!
• We will continue to shape a policy framework and an environment
in which we can ‘fintegrate’ the best that innovation has to offer to
better serve our clients and to open up the world of finance to
enable growth and to accelerate economic progress
• ‘Slower-burn’ RegTech developments are more likely as opposed
to big bang change….at least for the time being
• Collaboration amongst all players within the financial services
ecosystem (regulators, policymakers, incumbents, start ups etc.) is
the key that will start to unlock the opportunities for all….it takes
all of us!

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