Banks, Direct Speech, Financial Services, Fintech, Lithuania
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Saturday, 20.04.2024, 04:01
Bank of Lithuania: Progress of financial innovations requires equal treatment and solutions at European Union level
“The Bank of Lithuania has made a significant contribution
to the promotion of financial innovations – the FinTech ecosystem has grown in
the country and gained international recognition. We are now willing to share
our experience with other European countries, because we have to overcome the
fragmentation arising from divergent national regulations and approaches to
innovation. Europe can take up the leading international role in
designing and adapting FinTech solutions if we find a far-reaching and unified
approach at the community level,” said Marius Jurgilas, Member of the
Board of the Bank of Lithuania.
Digital financial services are playing an increasingly important role on the EU
institutional agenda. This year, the European Commission is planning to put
forward a new strategy for the development of the sector. Based on the
experience gained at the national level, the Bank of Lithuania offers key
considerations for a European approach in promoting financial innovations.
Financial innovation is often treated differently in
different EU Member States in terms of both regulatory and supervisory aspects.
In the opinion of the Bank of Lithuania, solutions should be found to deal with
this issue, which would reduce disparity in attitudes. Decisions at EU level
could provide impetus for change, for example by moving from directives which
provide for a certain degree of flexibility in transposition to domestic law to
regulations that are directly applicable and fully binding.
One of the areas where, according to the Bank of Lithuania,
agreement on equal treatment is especially important, is the prevention of money
laundering and terrorist financing, in particular with regard to the KYC
process and remote identification.
Financial innovations often emerge and grow faster than the
regulatory framework adapts, so it is important to find an appropriate
solution, one that does not slow down progress and is proportionate to the
risks involved. For this reason, it is important to ensure a technology-neutral
approach at the EU level, regardless of the underlying technology; if it has
the characteristics of a financial instrument, it should be subject to
appropriate regulation and supervision.
This is particularly true for virtual assets. In the opinion
of the Bank of Lithuania, a clear definition is needed at the EU level to
regulate and treat digital securities or financial instruments in the same way.
This would strengthen the EU single market and, at the same time, this “economy
of scale” would lead to more favourable financing for small and medium-sized
enterprises through innovative financing methods such as initial public
offering (IPO) or security token offering (STO).
In order to achieve more effective regulation, closer
cooperation between supervisory authorities and a lower administrative burden
for financial market participants, the Bank of Lithuania proposes to harmonise
and digitise the standards of data provided for supervisory purposes at the EU
level, using smart regulation technologies (e.g. RegTech, SupTech solutions).
In addition, a register of trusted providers of RegTech services should be
established and supervision of these services should be considered.
The Bank of Lithuania is also of the opinion that there is a
need for consensus on the concept of the regulatory sandbox and on rules for
assessing innovations being tested, and to promote cooperation between the
financial sector and supervisory authorities in other areas (e.g. law
enforcement, consumer rights protection).
In the discussion on how to promote the development of
instant payments in the EU, the Bank of Lithuania supports the proposal to create
a level playing field for both banking and non-banking sector participants
(e-money institutions, payment institutions) to access the payment
infrastructure and to ensure the universal availability of instant payments,
gradually seeking to make them a mandatory service.
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