EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Europaudvalget 2019-20
EUU Alm.del Bilag 807
Offentligt

Contribution ID: f693edc8-c49b-4d4b-a161-696be6c5d1fd

Date: 30/06/2020 11:33:04

Consultation on a new digital finance strategy

for Europe / FinTech action plan

Fields marked with * are mandatory.

Introduction

This consultation is now available in 23 European Union official languages.

Please use the language selector at the top of this page to choose your language for this consultation.

1. Background for this consultation

Digitalisation is transforming the European financial system and the provision of financial services to Europe’s

businesses and citizens. In the past years, the EU and the Commission embraced digitalisation and innovation in the

financial sector through a combination of horizontal policies mainly implemented under the umbrella of the Digital Single

Market Strategy, the Cyber Strategy and the Data economy and sectoral initiatives such as the revised Payment

Services Directive, the recent political agreement on the crowdfunding regulation and the

FinTech Action Plan

. The

initiatives set out in the FinTech Action Plan aimed in particular at supporting the scaling up of innovative services and

businesses across the EU, for example through enhanced supervisory convergence to promote the uptake of new

technologies by the financial industry (e.g. cloud computing) but also to enhance the security and resilience of the

financial sector. All actions in the Plan have been completed.

The financial ecosystem is continuously evolving, with technologies moving from experimentation to pilot testing and

deployment stage (e.g. blockchain; artificial intelligence; Internet of Things) and new market players entering the

financial sector either directly or through partnering with the incumbent financial institutions. In this fast-moving

environment, the Commission should ensure that European consumers and the financial industry can reap the potential

of the digital transformation while mitigating the new risks digital finance may bring. The expert group on Regulatory

Obstacles to Financial Innovation, established under the 2018 FinTech Action Plan, highlight these challenges in its

report published in December 2019.

The Commission’s immediate political focus is on the task of fighting the coronavirus health emergency, including its

economic and social consequences. On the economic side, the European financial sector has to cope with this

unprecedented crisis, providing liquidity to businesses, workers and consumers impacted by a sudden drop of activity

and revenues. Banks must be able to reschedule credits rapidly, through rapid and effective processes carried out fully

remotely. Other financial services providers will have to play their role in the same way in the coming weeks.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Digital finance can contribute in a number of ways to tackle the COVID-19 outbreak and its consequences for citizens,

businesses, and the economy at large. Indeed, digitalisation of the financial sector can be expected to accelerate as a

consequence of the pandemic. The coronavirus emergency has underscored the importance of innovations in digital

financial products services, including for those who are not digital native, as during the lockdown everybody is obliged

to rely on remote services. At the same time, as people have access to their bank accounts and other financial services

remotely, and as financial sector employees work remotely, the digital operational resilience of the financial sector has

becoming even more important.

As set out in the Commission Work Programme, given the broad and fundamental nature of the challenges ahead for

the financial sector, the Commission will propose in Q3 2020 a new Digital Finance Strategy/FinTech Action Plan that

sets out a number of areas that public policy should focus on in the coming five years. It will also include policy

measures organised under these priorities. The Commission may also add other measures in light of market

developments and in coordination with other horizontal Commission initiatives already announced to further support the

digital transformation of the European economy, including new policies and

strategies on data

artificial intelligence

platforms and cybersecurity.

2. Responding to this consultation and follow up

Building on the work carried out in the context of the FinTech Action Plan (e.g. the EU Fintech Lab), the work of the

European Supervisory Authorities and the

report issued in December 2019 by the Regulatory Obstacles to Financial

Innovation Expert Group

, and taking into account the contribution digital finance can make to deal with the COVID-19

outbreak and its consequences, the Commission has identified the following four priority areas to spur the development

of digital finance in the EU:

1. ensuring that the EU financial services regulatory framework is fit for the digital age;

2. enabling consumers and firms to reap the opportunities offered by the EU-wide Single Market for digital financial

services;

3. promoting a data-driven financial sector for the benefit of EU consumers and firms; and

4. enhancing the digital operational resilience of the EU financial system.

In this context and in line with

Better Regulation principles

, the Commission is launching a consultation designed to

gather stakeholders’ views on policies to support digital finance. It follows two public consultations launched in

December 2019, focusing specifically on

crypto-assets

and

digital operational resilience

This consultation is structured in three sections corresponding to the priorities areas 1, 2 and 3 presented above. Given

that the ongoing consultation on digital operational resilience fully addresses the issues identified as part of this priority

area, questions on this priority area are not reproduced in this consultation. As for priority area 1, this consultation

includes additional questions given that this priority area goes beyond the issues raised in the currently ongoing

consultation on crypto-assets. In addition, the Commission will also be consulting specifically on payment services.

Payment services and associated technologies and business models are highly relevant for the digital financial fabric,

but also present specificities meriting separate consideration. These considerations are addressed in a specific

consulta

tion on a Retail Payments Strategy

launched on the same day as this one. Finally, and specific to financial services, the

Commission is also supporting the work of a High Level Forum on Capital Markets Union, that is expected to also

address key technology, business model and policy challenges emerging from digitalisation.

The first section of the consultation seeks views on how to ensure that the financial services regulatory

framework is technology neutral and innovation-friendly,

hence addressing risks in a proportionate way so as not

to unduly hinder the emergence and scaling up of new technologies and innovative business models while maintaining

a sufficiently cautious approach as regards consumer protection. While an in-depth assessment is already on-going on

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

crypto-assets, assessment of whether the EU regulatory framework can accommodate other types of new digital

technology driven services and business models is needed. Looking at a potentially more complex financial ecosystem

- including a wider range of firms, such as incumbent financial institutions, start-ups or technology companies like

BigTechs - the Commission is also seeking stakeholders’ views on potential challenges or risks that would need to be

addressed.

The second section invites stakeholder views on ways to remove fragmentation of the Single Market for digital

financial services.

Building on the preparatory work carried out in the context of the 2018 FinTech Action Plan, the

Commission has already identified a number of obstacles to the Single Market for digital financial services and is

therefore seeking stakeholders’ views on how best to address these. In addition, the consultation includes a number of

forward-looking questions aiming to get stakeholders’ feedback as regards other potential issues that may limit the

deepening of the Digital Single Market and should be tackled at EU level.

Finally, the third section seeks views on how best to promote a well-regulated data-driven financial sector,

building on the current horizontal frameworks governing data (e.g. General Data Protection Regulation; Free Flow of

Data Regulation) but also on the recent sectoral developments such as the implementation of the revised Payment

Services Directive in the EU. Considering the significant benefits data-driven innovation can bring in the EU across all

sectors, the Commission recently adopted a new European Data Strategy and a White Paper on Artificial Intelligence.

Building on these horizontal measures, the Commission is now seeking stakeholders’ views on the potential additional

measures that would be needed in the financial sector to reap the full benefits of the data economy while respecting

European values and standards. Responses to this consultation will inform forthcoming work on a Digital Finance

Strategy/FinTech Action Plan to be adopted later in 2020.

Please note:

In order to ensure a fair and transparent consultation process

only responses received through our

online questionnaire will be taken into account

and included in the report summarising the responses. Should you

have a problem completing this questionnaire or if you require particular assistance, please contact

fisma-digital-

[email protected]

More information:

on this consultation

on the consultation document

on digital finance

on the protection of personal data regime for this consultation

About you

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EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

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EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Conradsen

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The Danish Financial Supervisory Authority (Finanstilsynet)

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EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

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EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

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EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

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of activity or sector (if applicable):

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at least 1 choice(s)

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Credit rating agencies

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I agree with the

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General questions

Europe’s strategic objective should be to ensure that European consumers and firms fully reap the benefits stemming

from digital finance while being adequately protected from the potential new risks it may bring. To achieve that, the

European financial sector needs to be at the forefront of innovation and its implementation in a market and production

environment in order to better serve consumers and firms in an efficient, safe, sound and sustainable manner. Strong

and innovative digital capacities in the financial sector will help improve the EU’s ability to deal with emergencies such

as the COVID-19 outbreak. It will help to further deepen the Banking Union and the Capital Markets Union and thereby

strengthen Europe‘s economic and monetary union and to mobilise funding in support of key policy priorities such as

the Green Deal and sustainable finance. It is also essential for Europe to safeguard its strategic sovereignty in financial

services, and our capacity to manage, regulate and supervise the financial system in a way that promotes and protects

Europe’s values and financial stability. This will also help to strengthen the international role of the euro.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

With a view to adopt a new Digital Finance Strategy/FinTech Action Plan for Europe later this year, the Commission is

now seeking your views to identify the priority areas for action and the possible policy measures.

Question 1. What are the main obstacles to fully reap the opportunities of

innovative technologies in the European financial sector (please mention no

m o r e

t h a n

4 ) ?

Please also take into account the

analysis of the expert group on Regulatory

Obstacles to Financial Innovation

in that respect.

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

1) Legal uncertainty can prevent financial companies from engaging with new innovative technologies. As an

example, several banks are, to our knowledge, reluctant of engage with crypto assets due to legal

uncertainty and thus they are not willing to take such risks. In addition, if a start-up company should prove to

be non-compliant with relevant regulation, a high risk of reputational damage and fines might lead innovative

start-ups to abstain from trying to enter the market.

2) Lack of IT skills within the financial companies can be an obstacle for the companies to reap the

opportunities of technologies in order to im-prove their business model or invent new products.

3) Uncertainty and insecurity among consumers due to potential lack of privacy, data protection and

transparency, which may lower consumer trust and thus be obstacles to fully reaping the technological

opportunities.

4) Low consumer mobility and a conservative mindset, especially among the older generations of

consumers, can be an obstacle to fully reap the opportunities of innovative technologies.

Question 2. What are the key advantages and challenges consumers are

facing with the increasing digitalisation of the financial sector (please

mention

than

4)?

For each of them, what if any are the initiatives that should be taken at

EU level?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Advantages:

1) New possibilities (new, more efficient and better financial tools etc.).

2) Lower costs.

3) More convenient, tailored solutions for the consumers.

4) More transparency and potentially more security if relevant risks are mitigated.

Challenges:

1) Cyber security and loss of privacy. Use of sensitive data (eg. in credit score assessments) without a true

/informed consent from the consumers.

2) Confusing/unmanageable distribution chains making it difficult for the consumer to know how and where

to file a complaint – i.e. it is not clear who is responsible, if something goes wrong.

3) Misselling* of financial products not targeted for the customer (but marketed to them).

4) Lack of understanding of a product and how the consumers’ data is used.

*See commentary to Q11.

Building on previous policy and legislative work, and taking into account the contribution digital finance can make to

deal with the COVID-19 emergency and its consequences, the Commission services are considering four key priority

areas for policy action to spur the development of digital finance:

1. ensuring that the EU financial services regulatory framework is technology-neutral and innovation friendly;

2. reaping the opportunities offered by the EU-wide Single Market for digital financial services for consumers and

firms;

3. promoting a data-driven financial sector for the benefit of EU consumers and firms; and

4. enhancing the operational resilience of the financial sector.

Question 3. Do you agree with the choice of these priority areas?

Yes

Don’t know / no opinion / not relevant

Question 3.1 Please explain your answer to question 3 and specify if you see

other areas that would merit further attention from the Commission:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

It is important to enable digital innovation in the financial sector as it is beneficial for consumers as well as

financial companies. Financial regula-tion should be technology neutral. Further, attention should be drawn

to increasing consumer and investor protection - especially regarding consent and data protection. Digital

competition should be ensured (e.g. big techs taking market shares from national financial institutions due to

an un-level playing field).

I. Ensuring a technology-neutral and innovation friendly EU

financial services regulatory framework

In order to be fit for the digital age, the EU financial services regulatory framework should neither prescribe nor prevent

the use of particular technologies whilst ensuring that regulatory objectives continue to be satisfied. It should also not

hinder the emergence and scaling up of innovative business models, including platform-based ones, provided that the

new risks these new business models may bring are properly addressed. The Commission undertook an in-depth

assessment of these issues in the context of the FinTech Action Plan and is already acting on certain issues. Even so,

in this fast-moving and increasingly complex ecosystem, it is essential to monitor technological and market trends on a

regular basis and to identify at an early stage whether new regulatory issues, including e.g. prudential ones, are

emerging and, if so, how to address them in a proportionate manner.

Question 4. Do you consider the existing EU financial services regulatory

framework to be technology neutral and innovation friendly?

Yes

Don’t know / no opinion / not relevant

Question 4.1 If not, please provide specific examples of provisions and

requirements that are not technologically neutral or hinder innovation:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Today, there are multiple examples of uncertainty regarding the use of AI and Distributed Ledger

Technology. There is also uncertainty regarding crypto assets, and we welcome the Commissions initiative

on this matter. Future regulation should focus on regulating the activity and not the tech-nology itself - in

other words be technology neutral.

Consumer and investor protection should be ensured. It is important to address regulatory obstacles, which

may slow down the uptake of new technologies in the financial sector. As an example, we particularly praise

the design of the Distance Marketing of Financial Services Directive that by being principle-based rather than

rule-based has been able to adapt to evolving use of digital devices and at the same time continues ensuring

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

a high level of consumer protection.

Regulatory requirements on paper based reporting should be reviewed and preferably phased out in order to

be technology neutral.

Question 5. Do you consider that the current level of consumer protection for

the retail financial products and services established by the EU regulatory

framework is technology neutral and should be also applied to innovative

ones using new technologies, although adapted to the features of these

products and to the distribution models?

Yes

Don’t know / no opinion / not relevant

Question 5.1 Please explain your reasoning on your answer to question 5,

and where relevant explain the necessary adaptations:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

The current level of consumer protection for retail financial products and services should be applied also to

technology companies’ products, alt-hough adapted to the features of their products. This could ensure that

there is no un-level playing field and ensure that investor protection measures do not depend on which entity

the costumer engages with in situations where different entities are offering similar services.

Identify areas where the financial services regulatory framework may need

to be adapted

The use of Distributed Ledger Technology (DLT), and in particular the use of one of its applications, the so-called

crypto-assets, have been identified as an area where the European regulatory framework may need to be adapted. A

public consultation on crypto-assets is on-going to gather stakeholders’ views on these issues. Beyond the area of

crypto assets, and looking at other technological and market developments, the Commission considers that it is

important to identify potential regulatory obstacles to innovation at an early stage and see how to best address these

obstacles not to slow down the uptake of new technologies in the financial sector.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 6. In your opinion, is the use for financial services of the new technologies listed below limited due to

obstacles stemming from the EU financial services regulatory framework or other EU level regulatory

requirements

that

also

apply

financial

services

providers?

Please rate each proposal from 1 to 5:

(irrelevant)

Distributed Ledger Technology (except crypto-assets)

Cloud computing

Artificial Intelligence/Machine learning

Internet Of Things (IoT)

Biometrics

Quantum computing

Other

(rather not relevant)

(neutral)

(rather relevant)

(fully relevant)

N.A.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 6.1 Please explain your answer to question 6, specify the specific

provisions and legislation you are referring to and indicate your views on

how it should be addressed:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Question 7. Building on your experience, what are the best ways (regulatory

and non-regulatory measures) for the EU to support the uptake of nascent

technologies and business models relying on them while also mitigating the

risks

they

may

pose?

Please rate each proposal from 1 to 5:

(irrelevant)

Setting up dedicated

observatories to monitor

technological and market

trends (e.g. EU Blockchain

Observatory & Forum; Platform

Observatory)

Funding experimentation on

certain applications of new

technologies in finance (e.g

blockchain use cases)

Promoting supervisory

innovation hubs and sandboxes

Supporting industry codes of

conduct on certain applications

of new technologies in finance

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Enhancing legal clarity through

guidance at EU level for

specific technologies and/or

use cases

Creating bespoke EU regimes

adapted to nascent markets,

possibly on a temporary basis

Other

Assess the need for adapting the existing prudential frameworks to the

new financial ecosystem, also to ensure a level playing field

Financial services providers are increasingly relying on technology companies to support delivery mechanisms for

financial services. Technology companies are also increasingly entering financial services directly. Such trends will

have an impact on the customers, the supply chain, incumbent financial institutions and their regulators and

supervisors. Big technology companies are able to quickly scale up services due to network effects and large user

bases. Their entry may accordingly over time significantly change market structures. This may require a review of how

the EU financial legislative framework regulates firms and activities, in particular if technology companies were to

become direct providers of specific services (e.g. lending) or a broader range of financial services or activities. This

may also require a review of how to supervise the overall risks stemming from financial services of such companies.

Financial regulation should harness the opportunities offered by digitalisation – e.g. in terms of innovative solutions that

better serve customers - while protecting the public interest in terms of e.g. fair competition, financial stability, consumer

protection and market integrity. The Commission accordingly invite stakeholders’ views on the potential impact of

technology companies entering financial services and possible required policy response in view of the above public

policy objectives.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 8. In which financial services do you expect technology companies which have their main business

outside the financial sector (individually or collectively) to gain significant market share in the EU in the five

u p c o m i n g

Please rate each proposal from 1 to 5:

y e a r s ?

(very low

market

below 1%)

(low

market

(neutral)

(

significant

market

share)

(very

significant

market

above 25%)

N.A.

Intra-European retail payments

Intra-European wholesale payments

Consumer credit provision to households with risk taking

Consumer credit distribution to households with partner institution(s)

Mortgage credit provision to households with risk taking

Mortgage credit distribution to households with partner institution(s)

Credit provision to SMEs with risk taking

Credit distribution to SMEs with partner institution(s)

Credit provision to large corporates with risk taking

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Syndicated lending services with risk taking

Risk-taking activities in Life insurance products

Risk-taking activities in Non-life insurance products

Risk-taking activities in pension products

Intermediation / Distribution of life insurance products

Intermediation / Distribution of non-life insurance products

Intermediation / Distribution of pension products

Other insurance related activities, e.g. claims management

Re-insurance services

Investment products distribution

Asset management

Others

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 8.1 Please explain your answer to question 8 and, if necessary,

describe how you expect technology companies to enter and advance in the

various financial services markets in the EU Member States:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We struggle to rank the percentages of market share for the individual services and instead we would like to

give general comments.

Big tech companies can potentially gain big market shares and outcompete national tech companies. They

are extending their business to also include financial services (currently focused on payments, loans and

investments). The big techs have an advantage due to the huge data collection, which national tech

companies cannot compete with.

We expect technology companies, which have their main business outside the financial sector, to gain the

biggest market share in payments in the upcoming five years. We believe the development in this area

depends on the payments infrastructure in the market, and big tech will have opportu-nities particularly in

cross-border. In Denmark, the national infrastructure is working very well.

Question 9. Do you see specific financial services areas where the principle

of “same activity creating the same risks should be regulated in the same

way” is not respected?

Yes

Don’t know / no opinion / not relevant

Question 9.1 Please explain your answer to question 9 and provide examples

if needed:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Banks have very limited possibilities in providing closely related services. Big techs entering into the financial

sector are not limited in the same way. Either banks should have the same possibilities in providing closely

related services, or big techs providing financial services should be limited in the same way.

In addition, the possibility of some sort of reciprocity in data sharing re-quirements should be further

investigated. It will be distortive to the competition in the sector if banks, insurance and pension firms are

forced to provide data, but are not given the opportunity to access multiple types of data that can be used for

innovation and development of new products themselves.

It is important not to ease regulatory requirements for tech companies if the risks are the same as for

financial companies, and thus should be regu-lated in the same way.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 10. Which prudential and conduct risks do you expect to change with technology companies gaining

significant

market

financial

services

the

five

upcoming

years?

Please rate each proposal from 1 to 5:

(significant

reduction

in risks)

Liquidity risk in interbank market (e.g. increased volatility)

Liquidity risk for particular credit institutions

Liquidity risk for asset management companies

Credit risk: household lending

Credit risk: SME lending

Credit risk: corporate lending

Pro-cyclical credit provision

Concentration risk for funds collected and invested (e.g. lack of diversification)

Concentration risk for holders of funds (e.g. large deposits or investments held in

a bank or fund)

Undertaken insurance risk in life insurance

(reduction

in risks)

(neutral)

(increase

in risks)

(significant

increase

in risks

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Undertaken insurance risk in non-life insurance

Operational risks for technology companies and platforms

Operational risk for incumbent financial service providers

Systemic risks (e.g. technology companies and platforms become too big, too

interconnected to fail)

Money-laundering and terrorism financing risk

Other

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 10.1 Please explain your answer to question 10 and, if necessary,

please describe how the risks would emerge, decrease or increase with the

higher activity of technology companies in financial services and which

market participants would face these increased risks:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We struggle to rank the risks individually and instead we would like to give our overall view that same

activities with the same risks should be regulated the same. Therefore, it is important that the regulatory

require-ments in relation to obtaining an authorization are fit for purpose in order to mitigate the risks. Market

developments, new technologies and busi-ness models should be considered and closely monitored.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 11. Which consumer risks do you expect to change when technology companies gain significant market

financial

services

the

five

upcoming

years?

Please rate each proposal from 1 to 5:

(significant

reduction

in risks)

Default risk for funds held in non-banks and not protected by Deposit Guarantee

Scheme

Liquidity risk

Misselling of insurance products

Misselling of investment products

Misselling of credit products

Misselling of pension products

Inadequate provision of information

Inadequate complaint and redress process and management

Use/abuse of personal data for financial commercial purposes

Discrimination e.g. based on profiles

(reduction

in risks)

(neutral)

(increase

in risks)

(significant

increase

in risks

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Operational risk e.g. interrupted service, loss of data

Other

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 11.1 If necessary, please describe how the risks would emerge,

decrease or increase with the higher activity of technology companies in

financial services and which market participants would face these increased

risks:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We struggle to rank the risks individually and will instead provide a gen-eral observation. An increased and

/or more widespread use of technology for providing e.g. investment advice to customers might increase the

risk of misconduct and “misselling” of unsuitable or inappropriate products to consumers. Such “misselling”

can have severe consequences for consumers.

Question 12. Do you consider that any of the developments referred to in the

questions 8 to 11 require adjusting the regulatory approach in the EU (for

example by moving to more activity-based regulation, extending the

regulatory perimeter to certain entities, adjusting certain parts of the EU

single rulebook)?

Yes

Don’t know / no opinion / not relevant

Question 12.1 Please explain your answer to question 12, elaborating on

specific areas and providing specific examples:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

There will be a need for adjustments in the legislation, including the limi-tations regarding which activities

that banks can offer. If regulation be-comes more activity-based, it will require a change in our rules and

prac-tices, as we are currently granting authorizations based on institution type, which then allows the

institution to offer an exhaustive list of activities. An activity-based regulation can have benefits, but it will

also make it difficult to supervise, as the concrete characteristics of the business group we need to supervise

will be unknown. However, we believe it is good to spread the risks so that it is not concentrated on a smaller

group of large financial institutions. It will be more resource-intensive to supervise, which should be taken

into account.

Adjustments should consider the distribution of certain financial prod-ucts. For example, distribution of

products via a misleading comparison portal, and investment products not suited for retail investors such as

bi-nary options. Thus, attention should be given to factors such as target market assessment of products and

services.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Enhance multi-disciplinary cooperation between authorities

The regulation and supervision of Digital Finance requires more coordination between authorities in charge of

regulating and supervising finance, personal data, consumer protection, anti-money-laundering and competition-related

issues.

Question 13. Building on your experience, what are the main challenges

authorities are facing while supervising innovative/digital players in finance

and

how

should

they

addressed?

Please explain your reasoning and provide examples for each sector you are

referring to (e.g. banking, insurance, pension, capital markets):

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Some of the main challenges relate to ”first movers” or innovative busi-nesses that present a business

model, which does not fit into a “one-size-fits-all” regulatory regime. This is especially the case in the fintech

sector, where services are often targeting industry specific areas in a new way, which can be difficult for the

NCA to approach and assess. The latter is especially the case, if no other NCA has encountered anything

like it, as there is no regulatory history.

Lack of understanding of the business model and technology can be a great challenge for authorities. In

these situations, regulatory sandboxes and innovation hubs can be very beneficial for the authority as well

as the company.

If big market players enter into the financial market, we believe a strong cooperation between authorities

nationally as well as within the EU is necessary. We should ensure the right framework for such cooperation.

Also see answer to question 12.

Question 14. According to you, which initiatives could be put in place at EU

level to enhance this multi-disciplinary cooperation between authorities?

Please explain your reasoning and provide examples if needed:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

See answers to question 21 and 23.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

II. Removing fragmentation in the single market for digital

financial services

Removing Single Market fragmentation has always been on the radar of EU institutions. In the digital age, however, the

ability of firms to scale up is a matter of economic productivity and competitiveness. The economics of data and digital

networks determines that firms with substantial network effects enjoy a competitive advantage over rivals. Only a strong

Single Market for financial services could bring about EU-wide businesses that would be able to compete with

comparably sized peers from other jurisdictions, such as the US and China.

Removing fragmentation of the Single Market in digital financial services while maintaining an adequate level of security

for the financial system is also essential for expanding access to financial services for consumers, investors and

businesses across the EU. Innovative business models and services are flourishing in the EU, with the potential to

bring greater choice and better services to consumers. Traditional players and start-ups are both competing, but also

increasingly establishing partnerships to innovate. Notwithstanding the opportunities provided by the Digital Single

Market, firms still face obstacles when scaling up across the Single Market.

Examples include a lack of consistency in the transposition, interpretation and application of EU financial legislation,

divergent regulatory and supervisory attitudes towards digital innovation, national ‘gold-plating’ of EU rules,

cumbersome licensing processes, insufficient funding, but also local preferences and dampen cross-border and

international ambition and entrepreneurial spirit and risk taking on the part of business leaders and investors. Likewise,

consumers face barriers in tapping innovative digital products and being offered and receiving services from other

Member States other than of their residence and also in accessing affordable market data to inform their investment

choices. These issues must be further addressed if the EU is to continue to be an incubator for innovative companies

that can compete at a global scale.

Question 15. According to you, and in addition to the issues addressed in

questions 16 to 25 below, do you see other obstacles to a Single Market for

digital financial services and how should they be addressed?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

In general, we are in favor of a more harmonized regulatory framework. This includes overcoming different

interpretations of EU legislation by the NCAs. Furthermore, as the digitalization of financial business models

and the trend towards a higher degree of specialization continues, it is likely that we will see an increased

focus on conducting activities across borders. It is also likely that we will see a growing need for “light” re-

gimes for particularly the specialized business models – where the current regulation might provide

significant barriers for operating across borders. An example of this is the crowdfunding regulation. The

rationale behind this regulation was to provide a “lighter” regime for the purest crowd-funding platforms,

which among other things is intended to facilitate eas-ier access to cross-border activities, e.g. by

harmonising the regulation and adjusting the requirements to be less costly than would be the case if they

were to be regulated under MiFID II.

Another point of consideration is whether it would be beneficial to license and supervise companies

providing specific services to financial compa-nies. We do for example see an increased amount of RegTech

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

companies providing solutions that support financial companies in being compliant with financial regulation.

Examples are companies providing solutions for CDD or transaction monitoring, digital identities as well as

suitability and creditworthiness tests. The validity of such business models rely directly on the requirements

in the financial regulation. As or if such business models become increasingly widespread, a relevant

discussion might be whether introducing some form of license or registration could add value. For example,

whether it would increase the quality and effectiveness of the solution to put more responsibility on the

service providers, whether it would help mitigate potential concentration risks, as well as possibly in-crease

the level of consumer and investor protection.

Finally, it could be relevant to consider how to improve the quality of information provided in both national

and European public registers. Hav-ing correct information is particularly relevant for the supervisory authori-

ties and the customers in countries in which firms execute their passport-ing rights, as well as for various

providers of RegTech solutions. We have as for example been presented with examples of companies

registered with a broader set of licenses in the countries into which they have pass-ported their activities,

than what they have obtained in the licensing coun-try. Thus, a starting point could be the registers on the

licenses obtained by the individual companies, e.g. the ESMA register on investment firms and credit

institutions.

Facilitate the use of digital financial identities throughout the EU

Both start-ups and incumbent financial institutions increasingly operate online, without any need for physical

establishment in a particular jurisdiction. Technologies are enabling the development of new ways to verify information

related to the identity and financial situation of customers and to allow for portability of such information as customers

change providers or use services by different firms. However, remote on-boarding relies on different technological

means (e.g. use of biometric data, facial recognition, live video) to identify and verify a customer, with different national

approaches regarding their acceptability. Moreover, supervisory authorities have different expectations concerning the

rules in the 5th Anti-Money Laundering Directive permitting reliance on third parties for elements of on-boarding. The

Commission will also consult shortly in the context of the review of the EU Anti-Money Laundering framework.

Question 16. What should be done at EU level to facilitate interoperable cross-

border

solutions

for

digital

on-boarding?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Harmonise rules governing

customer due diligence

requirements in the Anti-Money

Laundering legislation

Harmonise rules governing the

acceptable use of remote

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

identification technologies and

services in the Anti-Money

Laundering legislation

Broaden access for obliged

entities to publicly held

information (public databases

and registers) to enable

verification of customer

identities

Provide further guidance or

standards in support of the

customer due diligence

process (e.g. detailed ID

elements, eligible trusted

sources; risk assessment of

remote identification

technologies)

Facilitate the development of

digital on-boarding processes,

which build on the e-IDAS

Regulation

Facilitate cooperation between

public authorities and private

sector digital identity solution

providers

Integrate KYC attributes into e-

IDAS in order to enable on-

boarding through trusted digital

identities

Other

Please specify what else should be done at EU level to facilitate interoperable

cross-border solutions for digital on-boarding:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We have a general consideration related to rules restricting FIs from shar-ing information with other FIs

(secrecy rules). As digital onboarding be-comes increasingly widespread, the possibility for customers to

initiate onboarding procedures at multiple institutions also increases. A potential negative externality thereof

is an increased possibility for customers with criminal intentions to “shop around” to find the weakest link –

the institu-tions that (not intentionally) do not catch the criminal intentions in their KYC-processes (CDD or

EDD). Secrecy rules do to a large extend pre-vent institutions sharing information on customers, e.g. both

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

more objec-tive information on which customers that are currently onboarding, but also more subjective

information as for example risk assessment infor-mation on customers, particularly those assessed to be

more likely to have criminal intentions.

In the common fight against money laundering and terrorist financing, a necessary consideration in regards

of strengthening the first line of de-fense would thus be to consider, whether some synergies could be

achieved by allowing for FIs to share more customer information. Both on customers that are currently going

through onboarding procedures, but also current and terminated customer relations. For example, if a

specific person is “shopping around” by trying to be enrolled at multiple banks at the same time, having

access to such information could provide insight relevant for the specific FIs’ KYC-processes.

Additionally, if a FI has terminated a customer relationship due to suspi-cions of money laundering, that

information could provide valuable in-sights for other FIs doing KYC on that same person. It would also add

value to introduce a register or a tool used for international cooperation, making it possible for e.g. banks to

identify where a transaction comes from. We address this issue more in depth in our answer to question 23.

Obviously, before such initiatives can be considered, a comprehensive analysis of the legal implications

must be carried out, for example in re-gards of the customers’ legal rights (not guilty until proven guilty) and

in relation to their personal data. An institution’s suspicion should not be a reason to reject a customer, but

should rather function as an incentive to seek further assurance of the actual purpose of the specific

customer (EDD). Furthermore, the analysis should also consider other legal frame-works, as for example

GDPR.

Question 17. What should be done at EU level to facilitate reliance by

financial institutions on digital identities gathered by third parties (including

other

financial

institutions)

and

data

re-use/portability?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Make the rules on third party

reliance in the Anti-Money

Laundering legislation more

specific

Provide further guidance

relating to reliance on third

parties for carrying out

identification and verification

through digital means,

including on issues relating to

liability

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Promote re-use of digital

identities collected for

customer due diligence

purposes in accordance with

data protection rules

Promote a universally accepted

public electronic identity

Define the provision of digital

identities as a new private

sector trust service under the

supervisory regime of the

eIDAS Regulation

Other

Please specify what else chould be done at EU level to facilitate reliance by

financial institutions on digital identities gathered by third parties (including

by other financial institutions) and data re-use/portability:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Question 18. Should one consider going beyond customer identification and

develop Digital Financial Identities to facilitate switching and easier access

for

customers

specific

financial

services?

Should such Digital Financial Identities be usable and recognised throughout

Which data, where appropriate and in accordance with data protection rules,

should be part of such a Digital Financial Identity, in addition to the data

already required in the context of the anti-money laundering measures (e.g.

data for suitability test for investment services; data for creditworthiness

assessment;

other

data)?

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Please explain your reasoning and also provide examples for each case you

would find relevant.

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Currently, the discussion in DK regarding digital identities primarily re-volves around customer identification

/CDD. In general, the financial sec-tor has expressed that this specific need is key, as their onboarding of

and interaction with customers has become increasingly and sometimes exclu-sively digital.

Assigning a wider set of information to a digital identity is a complex exercise, and various issues have to be

considered. Obviously, focus has to be on data private and data security issues. There might also exist

issues relating to including specific regulatory requirements, as suitability and creditworthiness tests, in the

information set. The approach to such test varies among institutions on various factors, as for example the

required information set and the underlying calculation of a customer specific score. If such information

should be attached to digital identities, it is essential to consider how and to which level they could be

standardized, as well as how financial institutions can incorporate them and apply them as a foundation for

their own specific processes.

Thus, it is a complex exercise and the regulatory focus should be on the key issue, namely to assure that

identities can be verified digitally. Digital identities are also used outside the financial sector and in the

Nordic countries in particular also vis-à-vis the public sector. Hence, including various additional information

in a digital ID solution seems unwarranted. The regulatory framework should however not be a barrier for

private ac-tors wanting to expand digital identity solutions or other similar solutions to include further

information.

The future Danish eID solution, MitID, contains a core identity solution. On top of or around this eID solution,

financial companies have the possi-bility to build enhanced solutions for e.g. suitability tests.

As regards cross-border use, it is our understanding that this is what the eIDAS regulation aims to achieve. It

should be recalled that the need of cross-border identity establishment is currently far from less than that for

national ditto.

Question 19. Would a further increased mandatory use of identifiers such as

Legal Entity Identifier (LEI), Unique Transaction Identifier (UTI) and Unique

Product Identifier (UPI) facilitate digital and/or automated processes in

financial services?

Yes

Don’t know / no opinion / not relevant

If yes, in which framework(s) is there the biggest potential for efficiency

gains?

5000 character(s) maximum

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

While we agree that a further increased mandatory use of identifiers will facilitate digital and/or automated

processes in financial services, the sys-tems used to facilitate the automation process needs to be improved

or introduced. The core setup needs to be both robust and guided towards facilitating the needs of the

financial industry. With a move to a more centralized approach for identifiers, the structural importance of

these centralized systems increases. The focus of these central identifier institu-tions should therefore be on

their core tasks and those core tasks should be kept simple and lean. Furthermore, costs for the users need

to be kept low to ensure low barrier costs for even small entities wanting to partici-pate in financial markets.

Make it easier for firms to carry out technology pilots and scale up across

the Single Market

Currently, three national competent authorities have established regulatory sandboxes with five more under

development. Regulatory sandboxes are most often schemes to enable firms to test, pursuant to a specific testing plan

agreed and monitored by a dedicated function of the competent authority, innovative financial products, financial

services or business models. Besides, almost all competent authorities have established innovation hubs. Innovation

hubs provide a dedicated point of contact for firms to ask questions to competent authorities on FinTech related issues

and to seek non-binding guidance on regulatory and supervisory expectations, including licensing requirements. The

European Forum of Innovation Facilitators (EFIF) is intended to promote greater coordination and cooperation between

innovation facilitators established by financial sector supervisors to support the scaling up of digital finance across the

Single Market, including by promoting knowledge-sharing between innovation hubs and facilitating cross-border testing

in regulatory sandboxes.

Question 20. In your opinion (and where applicable, based on your

experience), what is the main benefit of a supervisor implementing (a) an

innovation hub or (b) a regulatory sandbox as defined above?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

The Danish FSA has implemented both an innovation hub and a regulato-ry sandbox. From our experience,

the general benefits of both initiatives fall in the same categories.

From a supervisory point of view, the initiatives provide a platform for getting valuable understanding of new

business models based on technol-ogies. Both in regards of understanding the innovative propositions and

the implications of their use. Thus, the initiatives create insights into how to approach supervision and how to

best mitigate the inherent risks in the business models. Furthermore, they provide us with a more in depth

un-derstanding of the various issues met by the sector in regards of achieving regulatory clarification for the

specific business models. The latter is par-ticularly helpful for identifying issues and shortcomings in the

current regulatory framework.

From a sector point of view, the benefits have mainly been the ability to receive more “handheld” guidance in

regards of the regulatory require-ments and perimeters. This is particularly relevant where the current regu-

latory framework is not clear when applied to specific technologies and (new) business models. Many of the

companies we have been in contact with are in the start-up phase, but incumbents also find it valuable,

partic-ularly when looking into how to incorporate new technologies into their business models.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

In regards of the differences between the two initiatives, the main differ-ence lies in the actual needs of the

companies.

An innovation hub has the advantage that companies can achieve guid-ance in regards of specific issues in

a relatively short time span. It is par-ticularly relevant for companies still considering how to structure the

business model or for companies that have a general understanding of the relevant regulatory requirements

for their business model, but might be in need of a more extensive guidance on specific requirements when

apply-ing new technologies. Thus, the innovation hub is relevant for a broad palette of companies, ranging

from innovative minds considering their next startup-project to incumbents looking into the use of new

technolo-gies, and particularly when the need for regulatory clarification lies within a relatively short time

span.

A regulatory sandbox is more relevant for business models, where the issues in understanding the

regulatory requirements are broad, and where the viability of the business model depends on the

supervisory authority’s interpretation of the rules in regards of the specific business model and/or

technology. Thus, the sandbox initiative is more relevant for companies that want to test the viability of their

business model and how it interacts with regulation in a safe environment. It encompasses both business

mod-els regulated under the financial regulation or services providers that pro-vide regulated entities with

more efficient solutions to assure compliance with financial regulation. A regulatory sandbox provides the

opportunity to test the viability of the business model and how it fits within regulation over a long time span,

and in case of the service providers with a test partner (a licensed financial institution), with the goal of

launching to the broader public when the test period finishes.

Question 21. In your opinion, how could the relevant EU authorities enhance

coordination

among

different

schemes

the

EU?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Promote convergence among

national authorities in setting

up innovation hubs and

sandboxes, through additional

best practices or guidelines

Facilitate the possibility for

firms to test new products and

activities for marketing in

several Member States (“cross

border testing”)

Raise awareness among

industry stakeholders

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Ensure closer coordination with

authorities beyond the financial

sector (e.g. data and consumer

protection authorities)

Promote the establishment of

innovation hubs or sandboxes

with a specific focus (e.g. a

specific technology like

Blockchain or a specific

purpose like sustainable

finance)

Other

Please specify how else could the relevant EU authorities enhance

coordination among different schemes in the EU:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

One point of consideration is how to facilitate better information sharing among different schemes within EU,

as well as how to communicate find-ings to the broader public. Innovation hubs and regulatory sandboxes

are becoming increasingly widespread among authorities; however, there ex-ists substantial friction in the

sharing of the obtained knowledge and posi-tions across jurisdictions. Initiatives that could facilitate efficient

syner-gies would provide great value, both when approaching companies in the national initiatives, but also

in the common work on continuously evaluat-ing and updating the European regulatory framework. Assuring

such syn-ergies could be part of the focus of EFIF, as well as aggregating and communication the findings

within EU to the broader public.

Question 21.1 If necessary, please explain your reasoning and also provide

examples for each case you would find relevant:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We must stress that it should be up to the individual jurisdictions how to establish their sandbox. Supervisory

approaches differs, and furthermore allowing companies to operate across borders with temporary

conditional permissions is likely to result in regulatory uncertainty and other issues. Focus should be on

improving information sharing between national sandboxes, rather than standardising the approach.

It seems that more awareness could be made of the possibility to test a business model in sandboxes

throughout the EU. Particularly, the fact that is a safe environment where both industry stakeholders and

authorities can share information and knowledge regarding new technologies. Thus, successful

engagements are valuable for both parties. We have observed that some companies, particularly larger

already regulated entities to some extend fear that participation, for example as a test partner to an innova-

tive solution, would lead to authorities further scrutinizing their compli-ance functions and business models.

This is not the focus of a regulatory sandbox.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 22. In the EU, regulated financial services providers can scale up

across the Single Market thanks to adequate licenses and passporting rights.

Do you see the need to extend the existing EU licenses passporting rights to

further areas (e.g. lending) in order to support the uptake of digital finance in

the EU?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

In almost every license regime in the financial regulation, we already have passport rights. Therefore, the

question is mostly relevant for companies not covered by the regulation. We support the initiatives such as

the crowdfunding regulation that enables specialised business models to pro-vide services cross-border.

RegTech companies could benefit from pass-porting rights. See our answers to question 15 and 41.

Ensure fair and open access to relevant technical infrastructures for all

financial service providers that wish to offer their services across the

Single Market

(It should be noted that this topic is also included, from the payment perspective, in the

Retail Payments consultation

)

The emergence of providers of technical services supporting the provision of financial services bring both opportunities

and challenges. On the one hand, such providers can facilitate the provision of cross-border services. On the other

hand, they may in certain cases limit access to the platform or relevant devices’ interface, or provide it under unfair and

non-transparent terms and conditions. Certain Member States are starting to take measures in this respect.

Question 23. In your opinion, are EU level initiatives needed to avoid

fragmentation in the Single Market caused by diverging national measures on

ensuring non-discriminatory access to relevant technical infrastructures

supporting

financial

services?

Please elaborate on the types of financial services and technical

infrastructures where this would be relevant and on the type of potential EU

initiatives you would consider relevant and helpful:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

A key issue today in the fight against of money laundering and terrorist financing (ML/TF) is that the criminal

networks are complex with activi-ties spread across both multiple persons and accounts in various financial

institutions (FI) all over the world. FI’s function as our first line of de-fense, and the quality of the customer

and enhanced due diligence (KYC-process) is key in fighting ML/TF. As such, FI’s are obliged to establish

procedures to identify suspicious and potential criminal customers and transactions, and share this

information with the national competent au-thorities for further investigation.

FIs only have access to data on their own customers and their activities within the given FI. This is due to

regulatory requirements, such as GPDR and the bank secrecy rules (as touched upon in our answer to

questions 16), which limits FIs ability to share information about suspicious custom-ers and accounts with

other FIs. For one this lowers the barrier for crimi-nals to simply “cross the street” to another FI and continue

their activities, but also has substantial implications for other elements the FIs KYC-processes, e.g.

transaction monitoring.

Additionally, FIs are required to report identified suspicious activities to the Financial Intelligence Units (FIU),

but have expressed concerns re-garding the amount and quality of the feedback they get on these reports, e.

g. what patterns and factors that are most likely to indicate ML/TF. Im-proving the feedback mechanism

could add value, as FIs could adjust and optimize their KYC-processes accordingly, and thus reduce the

amount of false-positives identified. In turn, this would also increase the quality of the reports sent to the FIU.

Seeing that, in general, the quite limited information base available to the FIs has implications for the quality

and effectiveness of the first line of defense, we find that it could become a key aspect in the fights against

ML/TF if strengthened.

On May 7 2020 the Commission launched its AML action plan with six new overall initiatives that will pave

the way in regards to the EU’s fight against ML/TF. One consideration could be a common European infra-

structure, giving FIs access to relevant information, and thereby strength-ening the first line of defense. This

could be done by providing a digital platform where FIs in some format could share information on risky cus-

tomers and suspicious behavior obtained through their KYC-processes. It could be information about specific

customers or patterns FIs should be aware of during in their KYC-process, e.g. insights obtained from analys-

ing the full dataset of notification to national FIUs (a sort of feedback mechanism) or insights obtained from

highlighted risk flags reported di-rectly by the FIs.

Thus, enabling data sharing across the EU could be a true game changer and make a real difference in the

fight against ML/TF. Supporting the financial sector in building a common infrastructure, where information

can be safely shared and assessed, should thus be a key priority in coming discussions.

Another example is AISP and PISP access to clearing systems. In addi-tion, direct access to payment

systems can be important for payment insti-tutions and e-money institutions in order to avoid being too

dependent on banks, which are their direct competitor. Furthermore, a clearer wording of article 35 and 36 in

PSD2 could be considered in order to ensure the ability for payment institutions to access large multinational

payment sys-tems (art. 35) and provide clearer guidance of the scope of the access to accounts maintained

with a credit institution (art. 36).

Empower and protect EU consumers and investors using digital finance

across the Single Market

An increasing number of new digital financial products and services expose consumers and retail investors to both

opportunities and risks: more choice, more tailored products, more convenience, but also bad advice, mis-selling, poor

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

information and even discrimination. Accordingly, it is important to carefully consider how to tap the potential of

innovative products, services and business models while empowering and protecting end-users, to ensure that they

benefit from a broader access to, and range of innovative products and services across the Single Market in a safe and

sound manner. This may also require reviewing existing legislation to ensure that the consumer perspective is

sufficiently taken into account. In addition, promoting financial education and digital financial skills may be important to

ensure that consumers and retail investors are able to make the most of what digital finance has to offer and to select

and use various digital tools, whilst at the same time increasing the potential size of the market for firms.

Question 24. In your opinion, what should be done at EU level to achieve

improved financial education and literacy in the digital context?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Ensure more affordable access

at EU level to financial data for

consumers and retail investors

Encourage supervisors to set

up hubs focussed on guiding

consumers in the digital world

Organise pan-European

campaigns and advisory hubs

focusing on digitalisation to

raise awareness among

consumers

Collect best practices

Promote digital financial

services to address financial

inclusion

Introduce rules related to

financial education comparable

to Article 6 of the Mortgage

Credit Directive, with a stronger

focus on digitalisation, in other

EU financial regulation

proposals

Other

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 25: If you consider that initiatives aiming to enhance financial

education and literacy are insufficient to protect consumers in the digital

context, which additional measures would you recommend?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We do not have suggestions for concrete initiatives, but we believe it is important to coordinate national

financial education initiatives at Europe-an level in order to promote the effectiveness of financial education

and to improve consumer protection and responsible consumption of financial products.

III. Promote a well-regulated data-driven financial sector

Data-driven innovation can enable better and more competitive financial services for consumers and businesses, as

well as more integrated capital markets (e.g. as discussed in the on-going work of the High-Level Forum). Whilst

finance has always been a data-intensive sector, data-processing capabilities have substantially improved over the

recent years, enabling fast parallel computing at low cost. Large amounts of data have also become available as

computers and their users are increasingly linked, supported by better storage data capabilities. These developments

have enabled the use of artificial intelligence (AI) applications to make predictions about future outcomes at a lower

cost. Following on to the European data strategy adopted on 19 February 2020, the Commission services are

considering a number of steps in this area (see also the parallel consultation on the Mifid review).

Question 26: In the recent communication "A European strategy for data",

the Commission is proposing measures aiming to make more data available

for use in the economy and society, while keeping those who generate the

d a t a

i n

c o n t r o l .

According to you, and in addition to the issues addressed in questions 27

to 46 below, do you see other measures needed to promote a well-regulated

data driven financial sector in the EU and to further develop a common

European data space for finance?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

No.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Facilitate the access to publicly available data in finance

Financial institutions are currently required to make public a wealth of financial information. This information e.g. allows

investors to make more informed choices. For example, such data include financial reporting and non-financial

reporting, prudential disclosures under the Capital Requirements Directive or Solvency II, securities market disclosures,

key information documents for retail investment products, etc. However, this data is not always easy to access and

process. The Commission services are reflecting on how to further facilitate access to public disclosures of financial

and supervisory data currently mandated by law, for example by promoting the use of common technical standards.

This could for instance contribute to achieving other policies of public interest, such as enhancing access to finance for

European businesses through more integrated capital markets, improving market transparency and supporting

sustainable finance in the EU.

Question 27. Considering the potential that the use of publicly available data

brings in finance, in which areas would you see the need to facilitate

integrated

access

these

data

the

EU?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Financial reporting data from

listed companies

Non-financial reporting data

from listed companies

SME data

Prudential disclosure

stemming from financial

services legislation

Securities market disclosure

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Disclosure regarding retail

investment products

Other

As part of the

European Financial Transparency Gateway (EFTG) project

, the Commission has been assessing

since 2017 the prospects of using Distributed Ledger Technology to federate and provide a single point of access to

information relevant to investors in European listed companies.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 28. In your opinion, what would be needed to make these data easily usable across the EU?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Standardised (e.g. XML) and machine-readable format

Further development of the European Financial Transparency Gateway, federating

existing public databases with a Single EU access point

Application Programming Interfaces to access databases

Public EU databases

Other

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Consent-based access to personal data and data sharing in the financial

sector

The Commission is reflecting how to further enable consumers, investors and businesses to maximise the benefits their

data can bring in the financial sector, in full respect of our European standards and values, in particular the European

data protection rules, fundamental rights and security.

The revised Payment Services Directive marked an important step towards the sharing and use of customer-

permissioned data by banks and third party providers to create new services. However, this new framework is limited to

payment data held by payment services providers, and does not cover other types of data relevant to financial services

and held by other firms within and outside the financial sector. The Commission is reflecting upon additional steps in

the area of financial services inspired by the principle of open finance. Any new initiative in this area would be based on

the principle that data subjects must have full control over their data.

Better availability and use of data, leveraging for instance on new technologies such as AI, could contribute to

supporting innovative services that could benefit European consumers and firms. At the same time, the use of cutting-

edge technologies may give rise to new risks that would need to be kept in check, as equally referred to in section I.

Question 29. In your opinion, under what conditions would consumers favour

sharing their data relevant to financial services with other financial services

providers in order to get better offers for financial products and services?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We support the initiative on an open finance policy, but we believe the key driver for the use of data should

be the users’ interests and empow-erment.

Using digital solutions and data presents a number of ethical dilemmas. If data is to be exploited to its full

potential, it is essential that consumers trust that their data is being used responsibly. If consumers are

sceptic about a product, they will not share their data.

In Denmark, the government has introduced a “data ethics seal”. A data ethics seal can be introduced as

proof that a product meets data ethics requirements. A data ethics seal can also make it easier for

consumers to navigate digital products (companies, apps, websites, services and prod-ucts), and for

companies to identify responsible partners (e.g. RegTech companies, cf. question 41-42). An EU-wide data

ethics seal could ensure consumers that a product is safe and that data is used in an ethical way.

It is also essential that consumers understand the product, its use and its functions. Financial education and

digital financial skills is key for con-sumers in order to understand information provided about a product and

the use of data. This is also essential in order for the consumers to give an informed consent when they

share their financial data. Most people do not read the terms and conditions, and even if they do, they do not

al-ways understand it due to the technical terms and legal language. In-formed consent is the most important

dimension of trust in open banking.

It is important to provide users with information on which actors will have access to the data and how it will

be used. It should be fully transparent to the consumer what data financial institutions possess. This could

be through a requirement on the institutions to have a central platform with all this information available for

the consumers, e.g. information on which companies the consumer has given consent to, which data the

respective companies are processing and to which products the companies are using the data.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Furthermore, it is important to assure that unwillingness to share infor-mation does not lead to financial

exclusion. Additionally, increased access to data leads to FIs being able to make customer assessment and

offerings more personalized. One potential and unwanted implication thereof could be financial exclusion

through discretionary pricing. See also question 31.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 30. In your opinion, what could be the main benefits of implementing an open finance policy in the EU?

Please rate each proposal from 1 to 5:

(irrelevant)

More innovative and convenient services for consumers/investors, e.g.

aggregators, comparison, switching tools

Cheaper traditional services for consumers/investors

Efficiencies for the industry by making processes more automated (e.g. suitability

test for investment services)

Business opportunities for new entrants in the financial industry

New opportunities for incumbent financial services firms, including through

partnerships with innovative start-ups

Easier access to bigger sets of data, hence facilitating development of data

dependent services

Enhanced access to European capital markets for retail investors

Enhanced access to credit for small businesses

Other

(rather not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 31. In your opinion, what could be the main risks of implementing

open

finance

policy

the

EU?

Please rate each proposal from 1 to 5:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Privacy issues / security of

personal data

Financial exclusion

Poor consumer outcomes (e.g.

unfair pricing strategies)

Misuse of consumers’ financial

data

Business confidentiality issues

Increased cyber risks

Lack of level playing field in

terms of access to data across

financial sector activities

Other

Question 32. In your opinion, what safeguards would be necessary to

mitigate these risks?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We believe a review of the data protection and competition rules is neces-sary. In general, we believe it is

important to regularly review regulation and guidelines with a view to maintaining proportionality, when new

technological developments, risks and market conditions arises.

We note the suggestion of “data spaces” from the Commission. If data is kept in an anonymous or encrypted

way in these data spaces, this could, if possible, provide for more security for the consumers and their data.

Open finance could make it possible for merchants to combine their tradi-tional products with financial

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

products. This could be retail stores offering loans and thereby also a discount, when you buy groceries.

Another sce-nario could be big techs starting to distribute financial products. The pos-sibility of creating

dynamic prices calls for more consumer protection. Price discrimination should be prevented.

More personal data collected by financial institutions create an opportuni-ty to calculate a quite accurate and

individual demand curve for each cus-tomer. It is essential to prevent financial exclusion based on a

consumer refusing to share his or her data, i.

Question 33. In your opinion, for which specific financial products would an

open

finance

policy

offer

benefits

and

opportunities?

Please rate each proposal from 1 to 5:

(irrelevant)

Savings accounts

Consumer credit

SME credit

Mortgages

Retail investment products (e.

g. securities accounts)

Non-life insurance products

(e.g. motor, home…)

Life insurance products

Pension products

Other

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Question 33.1 Please explain your answer to question 33 and give examples

for each category:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

1) We believe that the requirements to obtain a savings account are not extensive given that savings

accounts do not give rise to high risks for the account provider.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

2) Data can be used to assess creditworthiness. On the positive side, faster and better credit assessment

could mean fewer unjustified credit denials, anticipating consumers’ future needs, improving efficiency and

reducing costs for consumers. This could benefit clients (both retail and corporate) who may have easier

access to credit and receive more tailor-made lend-ing offers. Consumers will also be empowered to explore

a wider range of potential credit providers (e.g. crowdfunding platforms) as this data will be available to all

financial service providers, not just banks, thereby help-ing to increase competition in the sector. On the

negative side, it could lead to financial exclusion and price discrimination. It is important to reach a balanced

approach.

3) Data can give better opportunities to grant loans. Accessing online platforms’ transactional data (such as

sales, customer returns or pricing), banks can offer personalised B2B financial advisory (from cost manage-

ment and financial coaching to payments services, insurance, etc.) based on knowledge of the SME’s needs

and its market trends. However, this needs to be balanced with sufficient protection of the SME – see

answer above.

4) It is a big financial decision for a borrower to obtain a mortgage, and most consumers will likely look for

advice and dialogue with their bank to feel safe. Furthermore, as mortgages are of a substantial size, most

lenders are not likely to provide such loans without scrutinizing the borrowers and their financial situation.

5) E.g. investments in AIFs. Today, alternative investments are mainly accessed through banks, investment

firms or via direct communication with the investment manager. Hence, there may be a need to increase ac-

cess, particularly for retail investors. This is also exemplified through the increased interest from retail

investors in investment-based crowdfunding.

6) E.g. motor and damage. Could enable more products that are special-ised.

7) Health insurance if health data. We believe this can enable niche prod-ucts, but it is important to ensure

consumer protection.

8) Same as life insurance. Access to pension and social security data would allow financial institutions to

elaborate a more complete and in-depth social security profile for the customer. However, negative effects of

behavioral biases and temporal discounting on pension planning and ability to build savings should be

prevented.

As a side note, the Danish pensions sector is to a large extent based on collective schemes, rather than

individual ones. The contributions to the collective schemes are usually determined by the labour unions

collective bargain agreement. The requirements for open APIs and data sharing in this area and these

structures will therefore in Denmark expectedly not increase competition in the market. Developing open

APIs will increase the costs for the collective schemes. It should therefore be carefully ana-lysed whether

open APIs will provide benefits to the citizens.

Question 34. What specific data (personal and non-personal) would you find

most relevant when developing open finance services based on customer

c o n s e n t ?

To what extent would you also consider relevant data generated by other

services or products (energy, retail, transport, social media, e-commerce,

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

etc.) to the extent they are relevant to financial services and customers

consent

their

use?

Please explain your reasoning and provide the example per sector:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

We believe that this question is aimed at companies and what they need in order to support their respective

business models. However, it is our im-pression that an example of this is that AISPs seek to get access to

other types of accounts than payment accounts.

In other services, it is our impression that transport, social media and health data could be beneficial based

on costumer consent.

Question 35. Which elements should be considered to implement an open

f i n a n c e

Please rate each proposal from 1 to 5:

p o l i c y ?

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Standardisation of data, data

formats

Clarity on the entities covered,

including potential thresholds

Clarity on the way data can be

technically accessed including

whether data is shared in real-

time (e.g. standardised APIs)

Clarity on how to ensure full

compliance with GDPR and e-

Privacy Directive requirements

and need to ensure that data

subjects remain in full control

of their personal data

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Clarity on the terms and

conditions under which data

can be shared between

financial services providers (e.

g. fees)

Interoperability across sectors

Clarity on the way data shared

will be used

Introduction of mandatory data

sharing beyond PSD2 in the

framework of EU regulatory

regime

If mandatory data sharing is

considered, making data

available free of cost for the

recipient

Other

Support the uptake of Artificial intelligence in finance

Artificial intelligence (AI) can bring considerable benefits for EU citizens and businesses alike and the Commission is

committed to support its uptake with appropriate frameworks and investment. The White Paper on Artificial intelligence

details the Commission’s vision on a European approach for AI in Europe.

In the financial sector, AI and machine learning solutions are increasingly applied throughout the entire value chain.

This may benefit both firms and consumers. As regards firms, AI applications that enable better predictions can result in

immediate cost savings due to improved risk analysis or better client segmentation and product price differentiation.

Provided it can be achieved, this could in the medium term lead to better risk management and improved profitability.

As an immediate effect, AI allows firms to save on costs, but as prediction technology becomes more accurate and

reliable over time, it may also lead to more productive business models and entirely new ways to compete.

On the consumer side, the use of AI applications can result in an improved price-quality relationship of financial

services, better personalisation and in some cases even in financial inclusion of previously excluded consumers. At the

same time, AI may entail new risks such as opaque decision-making, biases, discrimination or loss of privacy.

The Commission is seeking stakeholders’ views regarding the use of AI and machine learning solutions in finance,

including the assessment of the overall opportunities and risks it could bring as well as the specificities of each sector, e.

g. banking, insurance or investment services.

Question 36: Do you/does your firm already deploy AI based services in a

production environment in the EU?

Yes

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Don’t know / no opinion / not relevant

Question 37: Do you encounter any policy or regulatory issues with your use

Have you refrained from putting AI based services in production as a result

of regulatory requirements or due to legal uncertainty?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

See answer to question 39 regarding the Danish FSAs best practice paper on supervised machine learning.

Question 38. In your opinion, what are the most promising areas for AI-

applications in the financial sector in the medium term and what are the main

benefits that these AI-applications can bring in the financial sector to

consumers and firms?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

It is our impression that RegTech and SupTech are some of the most promising areas for AI applications in

the financial sector. In general, it is our impression that AI can help automate and make processes, both

com-plex and simple, more efficient within financial institutions.

Some of the main benefits for the consumers are new types of financial products, lower costs, potentially

less bias (in financial advice, credit as-sessment etc.).

However, there is a risk of AI creating a stronger systematic bias if finan-cial institutions that rely too much

on AI models without a thorough gov-ernance.

Question 39. In your opinion, what are the main challenges or risks that the increased use of AI-

based models is likely to raise for the financial industry, for customers/investors, for businesses

and

for

the

supervisory

authorities?

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Please rate each proposal from 1 to 5:

1. Financial industry

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

1.1. Lack of legal clarity on

certain horizontal EU rules

1.2. Lack of legal clarity on

certain sector-specific EU rules

1.3. Lack of skills to develop

such models

1.4. Lack of understanding

from and oversight by the

supervisory authorities

1.5. Concentration risks

1.6. Other

2. Consumers/investors

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

2.1. Lack of awareness on the

use of an algorithm

2.2. Lack of transparency on

how the outcome has been

produced

2.3. Lack of understanding on

how the outcome has been

produced

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

2.4. Difficult to challenge a

specific outcome

2.5. Biases and/or exploitative

profiling

2.6. Financial exclusion

2.7. Algorithm-based

behavioural manipulation (e.g.

collusion and other coordinated

firm behaviour)

2.8. Loss of privacy

2.9. Other

3. Supervisory authorities

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

3.1. Lack of expertise in

understanding more complex

AI-based models used by the

supervised entities

3.2. Lack of clarity in

explainability requirements,

which may lead to reject these

models

3.3. Lack of adequate

coordination with other

authorities (e.g. data protection)

3.4. Biases

3.5. Other

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 40. In your opinion, what are the best ways to address these new

Please rate each proposal from 1 to 5

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

New EU rules on AI at

horizontal level

New EU rules on AI for the

financial sector

Guidance at EU level for the

financial sector

Experimentation on specific AI

applications under the control

of competent authorities

Certification of AI systems

Auditing of AI systems

Registration with and access to

AI systems for relevant

supervisory authorities

Other

Harness the benefits data-driven innovation can bring in compliance and

supervision

RegTech tools that are emerging across Europe can bring significant efficiencies for the financial industry. Besides,

national and European supervisory authorities also acknowledge the benefits new technologies can bring in the data-

intensive supervision area. Following on the findings of the Fitness Check of EU supervisory reporting, the Commission

is already acting to develop a supervisory reporting that is fit for the future. Leveraging on machine learning technology,

the Commission is mapping the concepts definitions and reporting obligations across the EU financial services

legislation to identify the areas where further standardisation is needed. Standardised concept definitions and reporting

obligations are a prerequisite for the use of more automated processes. Moreover, the Commission is assessing

through a Proof of Concept the benefits and challenges recent innovation could bring in the reporting area such as

machine-readable and machine executable legislation. Looking at these market trends and building on that work, the

Commission is reflecting upon the need for additional initiatives at EU level to facilitate the uptake of RegTech and/or

SupTech solutions.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 41. In your opinion, what are the main barriers for new RegTech solutions to scale up in

t h e

Please rate each proposal from 1 to 5:

S i n g l e

M a r k e t ?

Providers of RegTech solutions:

(irrelevant)

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

Lack of harmonisation of EU

rules

Lack of clarity regarding the

interpretation of regulatory

requirements (e.g. reporting)

Lack of standards

Lack of real time access to

data from regulated institutions

Lack of interactions between

RegTech firms, regulated

financial institutions and

authorities

Lack of supervisory one stop

shop for RegTech within the EU

Frequent changes in the

applicable rules

Other

Financial service providers:

(irrelevant)

Lack of harmonisation of EU

rules

(rather

not

relevant)

(neutral)

(rather

relevant)

(fully

relevant)

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Lack of trust in newly

developed solutions

Lack of harmonised approach

to RegTech within the EU

Other

Question 42. In your opinion, are initiatives needed at EU level to support the

deployment of these solutions, ensure convergence among different

authorities and enable RegTech to scale up in the Single Market?

Yes

Don’t know / no opinion / not relevant

Question 42.1 Please explain your answer to question 42 and, if necessary,

please explain your reasoning and provide examples:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

It should be further investigated what would be the right initiatives. As an example, we believe it is a natural

development that authorities give better access to real time public data in their registers. This could be

through open APIs.

Question 43. In your opinion, which parts of financial services legislation

would benefit the most from being translated into machine-executable form?

Please specify what are the potential benefits and risks associated with

machine-executable financial services legislation:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

A regulatory area that could benefit from being translated into machine- executable form could be the

reporting regulations for financial institu-tions.

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

Question 44. The Commission is working on standardising concept

definitions and reporting obligations across the whole EU financial services

l e g i s l a t i o n .

Do you see additional initiatives that it should take to support a move

towards a fully digitalised supervisory approach in the area of financial

s e r v i c e s ?

Please explain your reasoning and provide examples if needed:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

No.

Question 45. What are the potential benefits and drawbacks of a stronger use

of supervisory data combined with other publicly available data (e.g. social

media

data)

for

effective

supervision?

Should the Please explain your reasoning and provide examples if needed:

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

Reporting based on supervisory data standards have the benefit of being targeted the explicit monitoring and

compliance with the present regulato-ry framework. Effective supervision entail a risk-driven, risk based

super-visory focus on the most material risks and vulnerabilities. Effective su-pervision benefit from reporting

driven by standards facilitating risk based benchmarking and based on the most recent information available.

Super-visory data reporting standards is important for supervisory and financial institutions to respond to

current challenges within the present macro fi-nancial, technological and operational environment. It also

enables super-visors to communicate in a consistent and meaningful fashion both to the individual

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

institutions and to the public. Publicly available data can facili-tate a broader perspective for transparency

and information sharing, but for supervisory purposes and for the financial firms a structured perspec-tive in

the supervisory reporting and governance is a necessary condition to be able to respond effectively to

challenges in business performance and in mitigating risk facing the financial institutions.

IV. Broader issues

Question 46. How could the financial sector in the EU contribute to funding

the digital transition in the EU? Are there any specific barriers preventing the

sector

from

providing

such

funding?

Are there specific measures that should then be taken at EU level in this

respect?

5000 character(s) maximum

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

There are no regulatory barriers preventing the financial sector financing a “digital transition” or providing

such funding. Lack of (or challenged) economic and financial robustness in the financial sector and risks to fi-

nancial stability could potentially on the other hand be a barrier, at least for individual financial institutions.

Therefore, viability of financial insti-tutions in general and their ability to meet capital and liquidity require-

ments is important and a precondition. Present regulation in place for su-pervisory authorities has

established requirements for solvency purposes and governance on the lending and investment activities in

order to ad-dress risks faced by the financial institutions and their customers when providing such funding or

investment activity. In addition, guidance on business procedures and practices, sound credit standards or

investment processes is necessary to facilitate the funding process, and where appro-priate in addition to

require particular industry competences in the partici-pation of eventually more complex, less transparent

financing or invest-ment in projects or instruments that are subject to more complexity.

There is obviously a rationale and potential, from an economic and public perception, in digitalization,

fintech, and the use of new technology in the financial sector and elsewhere. However, it is important for a

financial institution itself and in the providing of funding and investment, and for a regulator or supervisor as

well, to understand the risks associated with fintech, new technology and increasing digitalization. New

technology and fintech in the financial sector has obviously potential to benefit the consumer who can get

digital, easy-to-use and innovative financial solu-tions but it is important to ensure the same level of

protection as tradition-al financial products. Moreover, for the financial sector providing the technology or

funding the technology with the same level of governance and sound business practices as in regular

business activity.

Question 47. Are there specific measures needed at EU level to ensure that

the digital transformation of the European financial sector is environmentally

sustainable?

5000 character(s) maximum

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy

including spaces and line breaks, i.e. stricter than the MS Word characters counting method.

While we do not have any suggestions at this time for specific measures, we are in favour of including such

environmental/sustainability aspects.

Additional information

Should you wish to provide additional information (e.g. a position paper,

report) or raise specific points not covered by the questionnaire, you can

upload your additional document(s) here:

The maximum file size is 1 MB.

You can upload several files.

Only files of the type pdf,txt,doc,docx,odt,rtf are allowed

cdd45998-d345-4ffa-ae62-0f987f3944fa/Additional_answers_digital_finance.docx

Useful links

More on this consultation (https://ec.europa.eu/info/publications/finance-consultations-2020-digital-finance-

strategy_en)

Consultation document (https://ec.europa.eu/info/files/2020-digital-finance-strategy-consultation-document_en)

More on digital finance (https://ec.europa.eu/info/business-economy-euro/banking-and-finance/digital-finance_en)

Specific privacy statement (https://ec.europa.eu/info/files/2020-digital-finance-strategy-specific-privacy-

statement_en)

More on the Transparency register (http://ec.europa.eu/transparencyregister/public/homePage.do?locale=en)

Contact

[email protected]

EUU, Alm.del - 2019-20 - Bilag 807: Notat og høringssvar vedr. EU-Kommissionens offentlige høring om digital finance strategy