The European Banking Authority (EBA) has issued an analysis of RegTech in the EU and commits to technological neutrality.
The regulator published its analysis on the current RegTech landscape in the EU. It assess the overall benefits and challenges faced by financial institutions and RegTech providers in the use of RegTech.
In the report, the regulator stated it is committed to technological neutrality. This requires monitoring and sharing of information on technological developments.
The EBA also identifies potential risks created from RegTech solutions that supervisors will need to address. These actions include ensuring technological neutrality within regulatory and supervisory approaches to RegTech, whilst navigating obstacles within the Single Market.
In the report, it looks at the application of technology-enabled innovation for regulatory compliance, with a deep-dive into AML and CFT, fraud prevention, prudential reporting, ICT security and creditworthiness assessment.
A number of recommendations were highlighted in the document to support adoption of RegTech. One suggestion is the a number of activities designed to improve the knowledge on the sector and reduce skill gaps among regulators and supervisors.
Other recommendations include steps to harmonise legal and regulatory requirements and leverage the role and expertise of the European Forum for Innovation Facilitators (EFIF) and national regulatory sandboxes to support innovation.
The EBA claims the main benefits financial institutions claim to have had from the use of RegTech are enhanced risk management, better monitoring and sampling capabilities, and reduced human errors.
As for the challenges faced by the RegTech market development are internal factors within financial institutions and RegTech providers. This includes data quality, security and privacy, interoperability and integration with existing legacy systems, poor API capabilities, and cost due diligence processes.
The EBA stated the current legal and regulatory framework is not the biggest obstacle for adoption of RegTech, but a lack of standardisation in member states could pose barriers.
A public online webinar has been planned for Q4 2021 to present and discuss the findings of the analysis.
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