Innovate Finance and the City of London Corporation have published a report calling for the FCA and PRA to introduce a test to help assess they ways in which technology can facilitate regulatory compliance. It says it is no longer possible to achieve regulatory compliance without using technology. The proposed ‘RegTech Test’ would be applied to to assess how technology can be used to help ensure compliance whenever new regulations are introduced. The report discusses a variety of regulatory initiatives to consider when assessing the impact on compliance technologies, and also recommends prioritising the introduction of a compliance technology impact assessment and the formation of a Compliance Technology Policy working group.
The City of London Corporation says RegTech is an area that can help the UK become more competitive as a hub for fintech innovation by taking advantage of global digital transformations.
The report says there are three key questions that will help to identify the impact of policy on compliance technology, which are whether the policy has considered:
- how it will impact compliance technology that regulated firms use
- how new or innovative solutions could help meet its goals
- how existing data standards or reporting requirements could be re-used to meet its objectives
To help regulators with this, the proposals include introducing:
- a Compliance Technology Impact Assessment at each stage of the policy-making process
- a Compliance Technology Working Group for each regulator comprising representatives from a range of regulated firms and the RegTech industry
- Compliance Technology Policy Sprints
- Compliance Technology Policy Impact Testing, including the existing Digital Sandbox and
- Compliance Technology Policy Efficacy Testing
It is intended that the recommendations will create a deeper learning partnership between regulated firms, vendors and policymakers regarding policy impact on compliance technology, and encourage new innovations that can more effectively meet regulatory objectives. The ‘RegTech Test’ also aims to give regulated firms more time to consider the impact of regulations on their use of technology, by engaging them in the policymaking process earlier.