Fintech Regulation and Supervision Challenges within the Banking Industry: A Comparative Study within the G-20

Description

Strengthening financial sector regulatory arrangements has been a major focus of the G-20 since the crisis in 2008, and progress in strengthening financial regulations is often cited as its success. Nonetheless, the overall contribution of the G20 as a political forum for the oversight of international financial regulation is diming as FinTech is blurring the boundaries between intermediaries and markets, as well as between digital service providers moving into the financial space, nonbank financial companies, and banks. Along the same line, financial technology is causing paradigm changes to the traditional financial system, presenting both challenges and opportunities. As FinTech grows rapidly, the importance of regulation and supervision becomes more prominent. The three cornerstones of banking: taking deposits, making loans, and facilitating payments are being reassembled functionally and digitally outside of the bank regulatory perimeter by certain firms. Without comprehensive consolidated supervision, no single regulator can see the whole picture and understand how a firm as a whole operates and takes risk. No crypto firm to date is subject to comprehensive consolidated supervision, creating gaps in supervision alongside risks. Countries around the world are taking divergent views on cryptocurrency and other so-called “Web3” technologies based on blockchain. This book aims to provide a comparison between the various available approaches, models, or legislations by identifying certain key legislative policies within the G-20 as they cope with innovative financial technologies, and will be of interest to scholars, students, and practitioners of banking, financial regulation, risk management, and financial technology. Acknowledgments Disclaimer Contents Acronyms List of Figures 1 Banking Regulation and Fintech Challenges 1.1 General 1.2 Evolution of Fintech 1.2.1 Fintech 1.0 (1886–1967) 1.2.2 Fintech 2.0 (1967–2008): Digitalization 1.2.3 Fintech 3.0 and 3.5 (2008–Current): The Start-Ups Era 1.3 Advantages and Disadvantages of FinTech 1.3.1 Advantages 1.3.1.1 Efficiency Enhancement 1.3.1.2 Financial Inclusion 1.3.1.3 Decentralization 1.3.1.4 Transparency 1.3.1.5 Reduced Credit Risks 1.3.2 Disadvantages 1.3.2.1 Concentration 1.3.2.2 Risks to Financial Stability 1.3.2.3 Macro-Financial Risks 1.3.2.4 Micro-Financial Risks 1.3.2.5 Managerial Risks 1.4 Fintech Activities 1.4.1 Digital Payment and Lending 1.4.2 Digital Platform Financing 1.4.3 Robot-Advice 1.4.4 InsurTech Business Model 1.4.5 Crypto Assets 1.5 FinTech Regulation 1.6 The Bali Fintech Paper 1.6.1 The Bali Agenda 1.6.2 The 12 Elements Under the Bali Agenda 1.6.2.1 Embrace the Promise of Fintech 1.6.2.2 Enable New Technologies to Enhance Financial Service Provision 1.6.2.3 Reinforce Competition and Commitment to Open, Free, and Contestable Markets 1.6.2.4 Foster Fintech to Promote Financial Inclusion and Develop Financial Markets 1.6.2.5 Monitor Developments Closely to Deepen Understanding of Evolving Financial Systems 1.6.2.6 Adapt Regulatory Framework and Supervisory Practices for Orderly Development and Stability of the Financial System 1.6.2.7 Safeguard the Integrity of Financial Systems 1.6.2.8 Modernize Legal Frameworks to Provide an Enabling Legal Landscape 1.6.2.9 Ensure the Stability of Domestic Monetary and Financial Systems 1.6.2.10 Develop Robust Financial and Data Infrastructure to Sustain Fintech Benefits 1.6.2.11 Encourage International Cooperation and Information Sharing 1.6.2.12 Enhance Collective Surveillance of the International Monetary and Financial System 1.7 Fintech Future 2 International Standard Setting Boards 2.1 General 2.2 The Basel Committee—Overview 2.2.1 Mission and Objectives 2.2.2 Activities 2.2.3 Organizational Structure 2.3 The Financial Stability Institute 2.3.1 Missions 2.3.2 Objectives 2.3.3 Organizational Governance 2.3.4 FSI Activities 2.4 International Association of Insurance Supervisors (IAIS) 2.4.1 Mission 2.5 International Organization of Securities Commissions 2.5.1 IOSCO Mission 2.5.2 IOSCO Governance 2.6 International Association of Deposit Insurers 2.6.1 Mission and Objectives 2.6.2 IADI Governance 2.7 The Committee on Payments and Market Infrastructure (CPMI) 2.7.1 Mission and Objectives 2.7.2 Governance/Organization 2.8 The Financial Action Task Force on Money Laundering (FATF) 2.8.1 Mission and Objectives 2.8.2 FAFT Secretary 3 FinTech Regulations and Supervision in the United States 3.1 General 3.2 Fintech Regulation and Supervision 3.2.1 The Office of the Comptroller of the Currency 3.2.1.1 The OCC Mission and Objectives 3.2.1.2 OCC and National Bank Charter 3.2.1.3 OCC Structure 3.2.2 The Consumer Financial Protection Bureau (CFPB) 3.2.3 The Securities and Exchange Commission (SEC) 3.2.3.1 Mission and Objectives 3.2.4 The Commodity and Futures Trading Commission (CFTC) 3.2.4.1 Mission and Objectives 3.2.4.2 Organizational Chart 3.2.5 US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) 3.2.5.1 FinCen Activities 3.3 Fintech Regulations 3.3.1 FinTech Regulation Approach 3.3.2 The OCC Fintech Charter 3.3.3 Digital Payment and Lending 3.3.4 Digital Platform Financing 3.3.5 Cryptocurrency 3.3.6 InsurTech 3.4 OCC Financial Statements 3.4.1 The Balance Sheet 3.4.1.1 Assets 3.4.1.2 Investments 3.4.1.3 Liabilities 3.4.1.4 Net Position 3.4.2 Statements of Net Cost 3.4.3 Revenues and Other Financing Sources 3.4.4 Statements of Changes in Net Position 3.4.5 Statements of Custodial Activity 4 The European Banking Authority 4.1 General 4.2 EBA Mission and Objectives 4.3 EBA Scope of action 4.4 EBA Organizational Structure 4.5 EBA Funding 4.6 The EU Sandbox Approach 4.7 Fintech Regulatory and Supervision 5 The Deutsche Bundesbank 5.1 General 5.2 Missions and Objectives 5.3 Organizational Structure 5.4 Deutsche Bundesbank and Banking Supervision 5.4.1 The Federal Financial Supervisory Authority (BaFin) 5.4.2 The Consumer Advisory Council 5.4.3 The Financial Stability Committee 5.4.4 The Insurance Advisory Council 5.4.5 The Securities Council 5.4.6 The Deutsche Bundesbank 5.5 Fintech Regulation 5.5.1 Sandbox Approach 5.5.2 Mobile Payments 5.5.3 Crowdfunding and Crowdlending 5.5.4 Robot-Advice 5.5.5 Blockchain 5.5.6 InsurTech 5.6 DB Financial Statements 5.6.1 The Balance Sheet 5.6.2 Profit and Loss 6 The Bank of France 6.1 General 6.2 Missions and Objectives 6.3 Organizational Structure 6.3.1 Governor and Deputy Governors 6.3.2 The Executive Committee 6.3.3 The General Council 6.3.4 The Audit Committee 6.3.5 The Compensation Committee 6.4 Fintech Regulation 6.4.1 Sandbox Approach 6.4.2 Electronic Payments 6.4.3 Crowdfunding and Crowdlending 6.4.4 Robot-Advice 6.4.5 Cryptocurrencies and Blockchain 6.4.6 InsurTech 6.5 BDF Financial Statements 7 The Bank of Italy (Banca d’Italia) 7.1 General 7.2 Missions and Objectives 7.3 Organizational Structure 7.3.1 The Governing Board 7.3.2 The Board of Directors 7.3.3 The Board of Auditors 7.3.4 The Shareholding Meeting 7.3.5 The External Auditor 7.4 Fintech Regulations 7.4.1 The Sandbox Approach 7.4.2 Digital Payments and Money Transfer 7.4.3 Crowdfunding 7.4.4 Robot-Advisory Services 7.4.5 Cryptocurrency 7.4.6 InsurTech 7.5 Banca d’Italia Financial Statements 7.5.1 The Balance Sheet 7.5.2 Profit and Loss 8 The Central Bank of Spain (Banco de España) 8.1 General 8.2 Missions and Objectives 8.3 Organizational Structure 8.3.1 The Governor 8.3.2 The Deputy Governor 8.3.3 The Governing Council 8.3.4 The Executive Commission 8.3.5 The Audit Committee 8.4 FinTech Regulation 8.4.1 The Sandbox Approach 8.4.2 Payment Services 8.4.3 Online Banking 8.4.4 Social Trading Platforms 8.4.5 Crowdfunding 8.4.6 Cryptocurrency 8.4.7 InsurTech 8.5 Financial Statements 8.5.1 The Balance Sheet 8.5.2 Profit and Loss 9 The Prudential Regulation Authority 9.1 General 9.2 Mission and Objectives 9.3 Organizational Structure 9.4 Funding 9.5 Fintech Regulatory and Supervision 9.5.1 Fintech Accelerator: Bank of England (BoE) 9.5.2 Digital Payment and Lending 9.5.3 Digital Platform Financing 9.5.4 Blockchain/Cryptocurrency 9.5.5 InsurTech Business Model 10 China Banking Insurance Regulatory Commission 10.1 General 10.2 Mission and Objectives 10.3 Main Responsibilities 10.4 Organizational Structure 10.5 Fintech Regulatory and Supervision 10.5.1 Digital Payments and Lending 10.5.2 Digital Financing Platform 10.5.3 Cryptocurrency 10.5.4 InsurTech 10.6 Financial Statements 10.6.1 Income Statement 10.6.2 Balance Sheet 10.6.3 Statement of Cash Flows 11 The Reserve Bank of India 11.1 General 11.2 Mission and Objectives 11.3 Organizational Structure 11.4 Funding 11.5 Fintech Regulatory and Supervision 11.5.1 The Sandbox Approach 11.5.2 Digital Payments and Lending 11.5.3 Digital Financing Platform 11.5.4 Cryptocurrency 11.5.5 InsurTech 11.6 Financial Statements 11.6.1 The Balance Sheet 11.6.2 The Statement of Income 11.6.3 The Statement of Cash Flows 12 The Bank of “South” Korea 12.1 General 12.2 Objectives and Missions 12.3 Organizational Structure 12.4 Fintech Regulations 12.4.1 The Sandbox Approach 12.4.2 Mobile Payments/Digital Payments 12.4.3 Digital Financial Platform 12.4.4 Robot-Advisor 12.4.5 Cryptocurrency 12.4.6 InsurTech 12.5 Financial Statements 12.5.1 The Balance Sheet 12.5.2 Statement of Income 12.5.3 Statement of Changes in Equity 12.5.4 Statement of Appreciation of Earned Surplus 13 Indonesia Bank 13.1 General 13.2 Objectives and Missions 13.3 Organizational Structure 13.4 Fintech Regulation 13.4.1 Sandbox Approach 13.4.2 Digital Payments 13.4.3 Digital Financial Platform 13.4.4 Cryptocurrency 13.4.5 Insurtech 13.5 Financial Statements 13.5.1 Statement of Financial Position 13.5.2 Statement of Profit & Loss 13.5.3 Statement of Cash Flows 14 Bank of Canada 14.1 General 14.2 Bank of Canada Mission and Objectives 14.3 Bank of Canada- Organizational Structure 14.4 Bank of Canada Funding 14.5 Fintech Regulatory and Supervision 14.5.1 The Sandbox Approach 14.5.2 Digital Payments 14.5.3 Crowdfunding 14.5.4 Cryptocurrency 14.5.5 Robot-Advice 14.5.6 InsurTech 14.6 Bank of Canada: Financial Statements 14.6.1 The Balance Sheet 14.6.2 The Statement of income 15 The Australian Prudential Regulation Authority 15.1 General 15.2 Mission and Objectives 15.3 Organizational Structure 15.3.1 Committees 15.3.2 Audit Committee 15.4 Funding 15.5 Financial Digital Information Supervision 15.6 Fintech Regulatory and Supervision 15.6.1 Sandbox Approach 15.6.2 Digital Payments and Lending 15.6.3 Digital Financing Platform 15.6.4 Cryptocurrency 15.6.5 InsurTech 15.7 Financial Statements 15.7.1 Statement of Financial Position 15.7.2 Statement of Income 15.7.2.1 APRA’s Income 15.7.2.2 Reserves 15.7.3 Statement of Changes in Equity 15.7.4 Statement of Cash Flows 16 The Swiss National Bank 16.1 General 16.2 SNB Mission and Objectives 16.3 SNB Organizational Structure 16.3.1 The Bank Council 16.3.2 The Governing Board 16.3.3 Departments 16.3.4 The Secretariat General 16.3.5 The Internal Auditors 16.4 SNB Funding 16.5 Financial Digital Information Supervision 16.6 Fintech Regulatory and Supervision 16.6.1 Sandbox Approach 16.6.2 Mobile Payment 16.6.3 Money Transfer 16.6.4 Distributed Ledger Technology 16.6.5 InsurTech 16.6.6 Robot-Advice (Online Wealth Management) 16.7 SNB Financial Statements 16.7.1 The Balance Sheet 16.7.2 Income Statement and Appropriation of Profit 17 The Central Bank of Russia 17.1 General 17.2 Mission and Objectives 17.3 Organizational Structure 17.4 Funding 17.5 Fintech Regulatory and Supervision 17.5.1 Sandbox Approach 17.5.2 Digital payments and lending 17.5.3 Digital Platform Financing 17.5.4 Blockchain/ cryptocurrency 17.5.5 InsurTech 17.6 Financial Statements 17.6.1 The Balance sheet 17.6.2 The Statement of income 17.6.3 Statement of Capital, Funds, and Profit Allocation 18 Brazil Central Bank 18.1 General 18.2 Mission and Objectives 18.3 Organizational Structure 18.4 Funding 18.5 Fintech Regulatory and Supervision 18.5.1 Sandbox Approach 18.5.2 Digital Payment and Lending 18.5.3 Digital Platform Financing 18.5.4 Cryptocurrency 18.5.5 InsurTech 18.6 Financial Statements 18.6.1 The Balance Sheet 18.6.2 The Statement of Income 18.6.3 The Statement of Change in Equity 18.6.4 Statements of Cash Flows 19 Central Bank of Argentina 19.1 General 19.2 Missions and Objectives 19.3 Organizational Structure and Governance 19.3.1 The Governor 19.3.2 The Deputy Governor 19.3.3 The Board of Directors 19.3.4 The Comptroller 19.4 FinTech Regulations 19.4.1 Sandbox Approach 19.4.2 Mobile Payments 19.4.3 Payment Service Providers and Payment Accounts Definitions 19.4.4 Crowdfunding 19.4.5 Cryptocurrency 19.4.6 InsurTech 19.5 Financial Statements 19.5.1 The Balance Sheet 19.5.2 Statement of Income 19.5.3 Statement of Change in Equity 19.5.4 Statement of Cash Flows 20 Central Bank of Mexico 20.1 General 20.2 Missions and Objectives 20.3 Organizational Structure and Governance 20.3.1 Governing Board 20.3.2 The Board of Directors 20.3.3 The Audit Committee 20.4 Fintech Regulations 20.4.1 Mexico Sandbox Approach 20.4.2 Lending 20.4.3 Crowdfunding 20.4.4 Cryptocurrency 20.4.5 InsurTech 20.5 Financial Statements 20.5.1 Balance Sheet 20.5.2 Statement of Income 20.5.3 Statement of Changes in Equity 21 The Saudi Arabia Monetary Authority 21.1 General 21.2 Mission and Objectives 21.3 Organizational Structure 21.4 Fintech Regulatory and Supervision 21.4.1 The Sandbox Approach 21.4.2 Digital Payment and Lending 21.4.3 Digital Platform Financing 21.4.4 Cryptocurrency 21.4.5 InsurTech 21.5 Financial Statements 21.5.1 Statement of Financial Position 21.5.2 Statement of Revenues and Expenses 22 The Central Bank of Turkey 22.1 General 22.2 Missions and Objectives 22.3 Organization Governance 22.3.1 The Governor 22.3.2 The Board 22.3.3 The Monetary Policy Committee 22.3.4 The Executive Committee 22.3.5 The General Assembly 22.3.6 The Auditing Committee 22.4 The CBRT Ownership and Funding 22.5 Fintech Regulation and Supervision 22.5.1 The Sandbox Approach 22.5.2 Digital Payment 22.5.3 Digital Lending 22.5.4 Blockchain and Cryptocurrency 22.5.5 Robot-Advice 22.5.6 InsurTech 22.6 Financial Statements 22.6.1 Balance Sheet as of December 2020 22.6.2 Profit and Loss Statement 23 The South African Reserve Bank (SARB) 23.1 General 23.2 Mission and Objectives 23.3 Organizational Structure 23.4 Funding 23.5 Fintech Regulatory and Supervision 23.5.1 The Sandbag Approach 23.5.2 Digital Payment and Lending 23.5.3 Digital Platform Financing 23.5.4 Robot-Advice 23.5.5 Cryptocurrency 23.5.6 InsurTech 23.6 Financial Statements 23.6.1 The Statement of Financial Position 23.6.2 Statement of Profit and Loss 23.6.3 Statement of Cash Flows 23.6.4 Statement of Change in Equity 24 Sandbox and Innovation Test Bed Case Study 24.1 General 24.2 Regulatory Sandbox and an Incubator 24.3 Examples of Sandbox Throughout the G-20 24.3.1 Sandboxes in the United States 24.3.2 Sandboxes in the European Union 24.3.3 Sandbox in the United Kingdom 24.3.4 Sandboxes in Asian-Pacific region 24.3.5 Sandboxes in Latin America 24.4 Cross-Border Sandbox Coordination 24.5 Global Financial Innovation network—The Global Sandbox Glossary of Terms Bibliography Index