Adaptive Financial Regulation and RegTech: A Concept Article on Realistic Protection for Victims of Bank Failures

Frustrated by the seeming inability of regulators and prosecutors to hold bank executives to account for losses inflicted by their companies before, during, and since the financial crisis of 2008, some scholars have suggested that private-attorney-general suits such as class action and shareholder derivative suits might achieve better results. While a few isolated suits might be successful in cases where there is provable fraud, such remedies are no general panacea for preventing large-scale bank-inflicted losses. Large losses are nearly always the result of unforeseeable or suddenly changing economic conditions, poor business judgment, or inadequate regulatory supervision—usually a combination of all three. Yet regulators face an increasingly complex task in supervising modern financial institutions. This Article explains how the challenge has become so difficult. It argues for preserving regulatory discretion rather than reducing it through formal congressional direction. The Article also asserts that regulators have to develop their own sophisticated methods of automated supervision. Although also not a panacea, the development of “RegTech” solutions will help clear away volumes of work that understaffed and underfunded regulators cannot keep up with. RegTech will not eliminate policy considerations, nor will it render regulatory decisions noncontroversial. Nevertheless, a sophisticated deployment of RegTech should help focus regulatory discretion and public-policy debate on the elements of regulation where choices really matter

FinTech, blockchain and Islamic finance : an extensive literature review

Purpose: The paper aims to review the academic research work done in the area of Islamic financial technology. The Islamic FinTech area has been classified into three broad categories of the Islamic FinTech, Islamic Financial technology opportunities and challenges, Cryptocurrency/Blockchain sharia compliance and law/regulation. Finally, the study identifies and highlights the opportunities and challenges that Islamic Financial institutions can learn from the conventional FinTech organization across the world. Approach/Methodology/Design: The study collected 133 research studies (50 from Social Science Research Network (SSRN), 30 from Research gate, 33 from Google Scholar and 20 from other sources) in the area of Islamic Financial Technology. The study presents the systematic review of the above studies. Findings: The study classifies the Islamic FinTech into three broad categories namely, Islamic FinTech opportunities and challenges, Cryptocurrency/Blockchain sharia compliance and law/regulation. The study identifies that the sharia compliance related to the cryptocurrency/Blockchain is the biggest challenge which Islamic FinTech organizations are facing. During our review we also find that Islamic FinTech organizations are to be considered as partners by the Islamic Financial Institutions (IFI’s) than the competitors. If Islamic Financial institutions want to increase efficiency, transparency and customer satisfaction they have to adopt FinTech and become partners with the FinTech companies. Practical Implications: The study will contribute positively to the understanding of Islamic Fintech for the academia, industry, regulators, investors and other FinTech users. Originality/Value: The study believes to contribute positively to understanding of Fintech based technology like cryptocurrency/Blockchain from sharia perspective.peer-reviewe

Ideas for a regulatory definition of FinTech

Purpose: The aim of the paper is to develop the approach to a legal definition of FinTech. Design/Methodology/Approach: In this paper we evolve possible approaches of FinTech legal definition, investigate existing approaches at the international level and examine the policies applied at the national levels. Document analysis, as a form of qualitative research, was used in this study. Findings: We found that in most countries the legislation does not specifically address fintech companies, and the legal framework equally regulates the activities of traditional service providers and fintech operators. In our opinion, no specific legislation for FinTech companies needed, each type of activity provided by a financial or technology company is subject to a specific legislation/regulation with primary focus on services and products provided as payments, insurance, investments etc. Practical Implications: The term FinTech is freely used by policy makers, regulators, companies, researchers, academics and the public, both nationally and internationally. According to international organizations such as the IMF, the World Bank and the OECD, FinTech offers the opportunity to accelerate economic growth and expand financial affordability/inclusion in all countries. Some countries are increasingly striving to become global or international regional hubs for FinTech and are working hard to develop interagency government strategies with a supportive legal environment. Originality/Value: There is still confusion about the nature and dynamics of FinTech among politicians, scientists and practitioners, as well as about the legal framework of this area. The value of this article is to clarify and propose an apprach to definition of FinTech by combining different approaches in a very original and innovative way.peer-reviewe

Generic Solution Architecture Design of Regulatory Technology (RegTech)

Regulatory Technology, or RegTech, uses new technology that assists the financial industry, such as FinTech and banks, in meeting regulatory compliance. RegTech automates various regulatory compliance activities that were previously manual, such as regulatory interpretation and regulatory reporting, amidst the challenges of the increasing volume of regulations and operational data. Some cutting-edge technologies discovered at RegTech include big data analytics, artificial intelligence, machine learning, robotic process automation, and cloud computing. Although very dominant in the financial industry, RegTech solutions have the potential to be applied in other regulated industries besides finance. Several studies have explored the potential for applying RegTech in industries other than finance, such as charitable organizations, real estate marketplace, pharmaceuticals, and healthcare. Therefore, this study aims to design a generic RegTech solution architecture so that it can be adopted and applied in various regulated industries achieve regulatory compliance more efficiently. Based on the evaluation results, the proposed architecture can be applied in an industrial environment other than financial to be considered generic. Furthermore, an evaluation of the comparison of regulatory compliance business processes without and by implementing RegTech can produce a time efficiency of 95.16%. These results show that RegTech solutions can achieve regulatory compliance more efficiently

RegTech in public and private sectors: the nexus between data, technology and regulation

Higher regulatory compliance requirements, fast and continuous changes in regulations and high digital dynamics in the financial markets are powering RegTech (regulatory technology), defined as technology-enabled innovation applied to the world of regulation, compliance, risk management, reporting and supervision. This work builds on a systematic literature review and a bibliometric analysis of the literature on RegTech, its influential papers and authors, its main areas of research, its past and its future. The resulting multi-dimensional framework bridges across four main dimensions, starting with regulation and technology, where one or more regulations, not necessarily financial ones, are addressed with the support of technologies (e.g. artificial intelligence, DLT, blockchain, smart contracts, API). Data play a central role, as sharing them enables data ecosystems, where additional value can be attained by each market participant, while data automation and machine-readable regulations empower regulators to pull data directly from the banks' systems and combine these data with data obtained directly from customers or other external sources. Several applications emerge, both for regulated entities, covering matters of compliance, monitoring, risk management, reporting and operations, as well as for authorities, which can leverage on RegTech (SupTech) solutions to make policies, to undertake their authorising, supervising and enforcement operations, for monitoring and controlling purposes, and even to issue fines automatically. As a consequence, stakeholders can reap a series of benefits, such as higher efficiency and effectiveness, accuracy, transparency and lower compliance costs but also risks, such as cyber risk, algorithmic biases, and dehumanization

The Darker Side of Fintech: the Emergence of New Risks

The financial sector has always been recognized as a traditional activity. One of the biggest challenges facing the financial sector recently is the introduction of new technologies. Financial innovations, and especially the development of financial technologies (FinTech), contribute to changing the way the entire financial system, including the banking sector, changes in the digital economy. The changes brought about by financial innovations and technologies condition all market participants, and especially banks, to continuously improve their business in order to keep up with the competition. FinTech enable easier access to financial services, improvement of traditional services, provide greater efficiency, lower costs and automation of regulatory reporting. They have changed the way we perceive financial institutions. Banks can increasingly be seen as an application on the phone and computer through which financial services can be performed, less and less as a grand building that instils confidence. However, it should be borne in mind that the application of financial innovations, in addition to the advantages, carries with it many risks, in a way that it can be said that digital technologies change existing ones, but also bring new risks in the field of financial services. The key risks caused by these technologies include strategic, operational and cyber risk, the risk of business compliance with data protection regulations, as well as liquidity risk. The importance of outsourcing risk is not negligible. It is precisely because of the speed of change and innovation that new risks are constantly emerging. With the growing importance and number of these firms, as well as the speed of their cross-border transactions, the fact is that it is necessary that these firms must adjust the way they measure risk in accordance with the speed and pace of their development. The importance of risk management must be one of the key points for FinTech companies, both now and in the future. Due to the observation of advances in financial technologies and the assessment of the risks that financial innovations bring, there is a need to harmonize regulatory frameworks, in order to ensure that none of the financial service providers would be at a disadvantage. However, regulatory bodies must carefully consider the dynamics and manner of regulation, bearing in mind that in a rapidly changing environment, excessive and rapid regulation carries the risk of undesirable outcomes in a way that does not exploit the full potential of innovative technologies. The development and increasing use of financial technologies affects the activities of all participants in the financial market, which imposes the need for continuous learning and adaptation of users and providers of these services, as well as supervisors and regulators. An additional challenge for financial institutions is the fact that competition in the provision of financial services comes from IT companies, which necessarily imposes the need to adapt its business models. Financial institutions are facing one of the biggest business challenges. All this brings special challenges for the creators of regulatory standards (RegTech) and the development of supervision based on new technologies (SupTech)

Bits and bytes of financial regulation: the RegTech environment

Since 2008, banks have spent more than €342 billion on settlements, enforcement actions, and fines, and until 2020 according to Reuters this value is expected to rise to €400 billion. As a result, technological solutions were implemented to help financial institutions deal with the increasing compliance burden and regulators addressing the constant difficulties of enforcing and monitoring regulatory requirements to limit risks and promote financial stability. This led to the emergence of a whole new movement in the Financial Industry: Regulatory Technology or Regtech. The aim of this paper is to explain the regtech environment in the financial sector. We highlight how technology can help financial institutions dealing with risky behavior and regulatory demands in the most efficient and cost-effective way.info:eu-repo/semantics/publishedVersio

Legal and Regulatory Implications of Disruptive Technologies in Emerging Market Economies

The is report was produced for the World Bank and looks at the legal implications which may impact on the introduction of disruptive technology in emerging markets