Mr Ed Sibley, Deputy Governor of the Central Bank of Ireland, discussed innovation in financial services, its capacity to bring many benefits for consumers, the economy and society in general and the need to do innovations well by regulators and supervisors .
Innovation in financial services is essential to the effective functioning of a competitive economy. However, here is where a challenge lies for financial regulators. Innovation is good, but not all innovations are good, and not all good innovations are done well. So regulators and supervisors need to:
not get in the way of 'good' innovation;
seek to prevent or limit innovations that are detrimental to the goal of well functioning financial services and markets; and
ensure that the associated risks are well-managed.
These are important topics for the Central Bank.
Mr Ed Sibley covered following topics in his speech:
1. The role of the Central Bank regarding innovation in financial services;
2. The Central Bank’s approach to innovation;
3. Innovation in financial services; and
4. Foundations necessary to successful innovation in financial services
Mr Sibley said “The Central Bank also aims to keep abreast of the emerging trends brought about by technological innovation so that we can identify, understand and manage the risks these changes present. While today I will speak about financial innovation, digital transformation and disruptive technology, it is important to stress that the rules and principles of regulation and supervision apply to all the firms we regulate, regardless of the technology they deploy. Our focus rather, is to ensure that where innovation facilitates new and better solutions, it does so in a framework which does not prevent regulators from meeting their mandates and strategic responsibilities.”
“Technological innovation is often cross border in nature. It is important that the Central Bank is engaged in relevant international policy discussions. We participate in multiple innovation focused workstreams of the ESAs. For example, we are a member of a recently created working group which is looking at how AI is used in financial services. Similar groups we are involved in are looking at cloud outsourcing, cyber risk, and crypto assets. The EC has set up a forum of European Financial Innovation facilitators, where we gather, along other national competent authorities, to share learnings and engage in dialogue to better shape policy. The next EC will also establish a dedicated unit focused on financial technology. The new unit will be tasked with developing policies and rules on crypto assets and cybersecurity. It will also have a role in ensuring the EU is prepared to handle large technology companies increasingly engaging in financial services. The establishment of this new unit shows the level of importance that the EC will place on technological innovation in the near future. The Central Bank welcomes the new EC’s strong FinTech focus. Through our engagements at the ESA’s and the ECB/SSM, we look forward to engaging with our EU peers on issues including the potential development of EU legislation on crypto assets, including so called stablecoins and the potential move towards a direct supervision model for cloud service providers.”
Full speech on BIS
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