Banks debate regulators' role in driving innovation

“We need to be proactive on either side: regulators and financial institutions. What we need to do is bring all the relevant parties onboard on this digital journey, and this could be the regulator or it could be internally within the bank. All these people need to be involved right from the start,” said Sotiris …

by | December 3, 2019 | bobsguide

“We need to be proactive on either side: regulators and financial institutions. What we need to do is bring all the relevant parties onboard on this digital journey, and this could be the regulator or it could be internally within the bank. All these people need to be involved right from the start,” said Sotiris Manderis, MD digital, corporate and investment banking at HSBC, during a panel at FinTech Connect in London this afternoon.

Karolina Kalkantara, ED structured trade and receivables finance at Santander, said regulators should not be at the forefront of leading innovation.

“I’ve got a bit of a contrarian view on that in the sense that I don’t think regulators can lead as such,” she said.

“I think banks already find it difficult to lead, so in my view regulators should react in an open and permissive manner… Some things they can do well but there are other things where the concept is great, but the implementation is very restrictive.”

She offered the EU’s general data protection regulation (GDPR), the second markets in financial instruments directive (Mifid II), and the second payments services directive (PSD2) as examples with great regulatory concepts, but poor implementation.

“The idea is good, but we need to translate it in a practical way, in a business way that does not kill our business as such.”

According to Daniel Zinkin, MD technology at JPMorgan Chase, regulators could drive implementation, but collaboration across global bodies is necessary.

“When you operate in many countries around the world, there’s no single regulator who can do anything that’s particularly helpful for you to go do something differently because fundamentally, somebody somewhere can fine you or sanction you,” he said.

He believes regulators can set the tone for how innovation can occur, citing the UK’s Financial Conduct Authority (FCA) as an example.

The FCA launched its regulatory sandbox feature in 2015 with the aim to help businesses test innovative propositions in the market with real customers, but within a controlled setting. On November 6, the FCA’s director of innovation – Nick Cook – announced that the regulatory body ought to keep up with the pace of technology-led innovation in the market. 

Zinkin elaborated: “I think we need a lot of regulatory collaboration … the FCA did a good job trying to understand what the technology can do and how it can be applied, but that also requires coordination to try and standardise it.”

Kalkantara responded that regulators should be kept in the loop, but that she doesn’t expect them to lead any changes.

Further, the panel discussed the slow pace of innovation within capital markets relative to retail markets. Adam Toms, CEO of OpenFin Europe, said the same customer expectations within retail banking now apply to corporates.

“At the moment, the client journey is terrible,” said Kalkantara. “It’s terrible for the client, and it’s also painful for our bankers.” She said capital markets can learn from the retail space.

Zinkin echoed these views, stating that there should be no difference between a corporate and a retail experience.

“Every corporate customer is made up of a series of individual retail customers. If I can make a payment of £1,000 on my personal bank account, and I want to make £1bn on my corporate app, I don’t see a great deal of difference.”

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