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Working as/with a "FinTech" in a regulated environment
- 1. Working as/with a « Fintech » in a regulated environment Solenne Niedercorn-Desouches November 2020
- 5. The three EU supervisory authorities • European Securities and Markets Authority (ESMA) • European Banking Authority (EBA) • European Insurance and Occupational Pensions Authority (EIOPA) • Mission • and….there is the ESRB
- 6. At EU level • Regulations • Directives • Recommendations • Decisions • ITS and RTS • Guidelines
- 7. At Member State Level • Responsibility for implementing binding EU legal acts lies primarily with the EU countries. Certain binding legal acts require uniform conditions for implementation. • Across EU countries : different regulators with different powers from one country to another. • Example: France vs Lux.
- 9. Regulatory framework • Capital Requirements Directives • Market Abuse • Financial crime • European market infrastructure regulation • Markets in Financial Instruments Directive • Securities Financing Transactions Regulation • Short selling • Alternative Investment Fund Managers Directive • Payment service Directive • Undertakings for the Collective Investment in Transferable Securities • Prospectus • Solvency • etc…
- 10. EU passporting • Freedom of establishment • Freedom to provide services
- 11. Why different layers of regulation despite « EU harmonisation »?
- 13. Examples • Mortgage is very different in France vs other countries • Savings regulation is also driven by local specific habits and rules
- 14. Use case 1: Startup Assessment
- 15. Your perimeter • Value proposition and business model • Competitors • Target clients (retail vs institutional clients) • Services • Potential partnerships wit regulated institutions • High level definition of the product(s) / Product Roadmap • High level processes • Home based country • Infrastructure • External providers
- 17. Your regulatory environment • What is our current regulatory framework? • Whats does it mean? How does it impact our strategy? • What is our regulatory strategy? • How is our regulator organized? • What’s the set-up of our competitors? • Is your product/service “new” from a regulatory perspective?
- 18. Use case 1: Startup Preparation work
- 20. Must Dos • Plan your filing process as a project with a real task force • Request advice from specialists • Adapt your Business Plan in consequence • Liaise with your Shareholders/Board • Read • Take this process seriously / This as a great opportunity
- 21. Use case 1: Startup Filing process
- 23. Your filing process • From “light” to “hard” • Rabbit vs Turtle • Painful but structuring • Multi disciplinary approach requiring different competencies • Complete sanity check of your future activity, your partners, your processes, your IT security…
- 24. Dos and Dont’s • Meet your regulator(s) • Be precise (4 eyes principle) • Be proactive and reactive • Be humble and honest • Be irreproachable and know your subject and • Don’t lie • Don’t improvise • Request some support from specialists but don’t delegate the entire filing process
- 25. Use case 1: Startup Once authorized
- 27. A new world • Entity with rules : Directives (AML/CTF - Outsourcing - Compliance charter…) • Processes in place (onboarding, BCP/ DRP, provider / SLA monitoring…) • Reporting to the regulator(s) • Solvency ratio to follow • Audits to perform (internal/external) • Governance to monitor (GA/Board/ ExCo) • Communicate / Log your contacts with the regulator • Providers to monitor • Best exec. to monitor • Suitability tests to perform • Control plan to define • Risk Matrix to set • EBA rules to follow • etc…
- 28. Must Dos • Set pragmatic processes tailored to your entity / the size of your team (proportionality principle) • Build your own tools as much as you can • Log all your to dos in a project management tool and define a project plan • Define your controls • Remain aligned with what you have explained to your regulator • Define clearly the roles according to the internal controls
- 29. Use case 1: Startup Smart with regulation
- 31. Must Dos • Analyse all the options according to your business model • Consider the local rules of your target countries • Build a strategy and try to assess the impact on your company • Define your recruitment needs according to each phase
- 32. Use case 1: Startup Think one step ahead
- 34. Must Dos • Prepare your next steps should you target a new license • Build a smart regulatory watch • Meet regularly your pairs • Exchange with your auditors • Exchange with the community • And please : build your ESG charter
- 35. Use case 2: Bank Assessment
- 37. Love crush? • Risk averse vs eager to risk • Short vs long Momentum • Incumbent vs new market • Part vs not part of DNA • Processed vs Agile • Culture clash
- 38. Keep it simple but be realistic
- 39. Must Dos • Perform a quality assessment to avoid bad surprises (not THE full- fledge-heavy assessment) • Involve your Procurement / CISO / DPO early in the process • Draft « light » contracts (incl. « light » SLA) • Define an exit strategy • Set some measurable KPIs and implement controls • Perform a regulatory assessment (incl. Categorization : Outsourcing) • Is there a need for specific authorization from the regulator?
- 40. Use case 2: Bank Notification / Authorization
- 42. Your regulator • Any type of material outsourcing leads to an authorization from the regulator • Process implies a filing • Example in France : PSEE
- 43. Must Dos • Liaise with the FinTech player to prepare your file • Set a file aligned with the context • Consider this process as a joint effort • Set a small taskforce liaising with the FinTech
- 44. Let’s stay in touch