The European Banking Authority (EBA) published today a report identifying potential impediments to the cross-border provision of banking and payment services in the EU. Developed under the EBA’s FinTech Roadmap, this Report calls on the European Commission to facilitate cross-border access, including the update of interpretative communications on the cross-border provision of services and further harmonisation of consumer protection, conduct of business and AML/CFT requirements, in order to facilitate the scaling up of activity cross-border.
Digital solutions can increase choice by enabling consumers access to a wider population of providers of financial services. However, the full potential of these solutions has not yet been achieved in the EU, in part due to divergences in regulatory requirements and supervisory practices across the Member States. Identifying and resolving these issues is a necessary step to addressing barriers to market entry, supporting the scaling up of financial services across the EU, and improving the competitiveness of the EU Single Market.
The first important challenge is the identification of when a digital activity is to be regarded as a cross-border provision of services. Although this is a crucial element in determining which regulatory and supervisory frameworks apply, currently, competent authorities and firms lack clear guidance on how to classify cross-border activity under the freedom to provide services or right of establishment.
The second challenge stems from areas of EU law that are not fully harmonised or are not yet covered by EU law. In particular, the EBA identifies issues related to authorisations and licencing, consumer protection, conduct of business requirements and anti-money laundering (AML) and countering the financing of terrorism (CFT).
Left unaddressed these issues may impede institutions and other FinTech firms from providing banking and payments services cross-border within the EU. Therefore, the EBA recommends the European Commission take action, including the update of its interpretative communications to support the identification of cross-border services taking account of the digitisation of financial services and the development of legislative proposals to further harmonise requirements relating to consumer protection, conduct of business and AML/CFT.
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„Though Libra has met with fierce resistance from central banks and supervisory authorities and might never see the light of day, in many other cases tech firms (both start-ups and established big players) have successfully captured bits and pieces of universal banks’ traditional value chain. This trend may only intensify in the coming years. In this environment, European banks remain squeezed.”