LONDON: The European Union’s banking watchdog said on Tuesday that banks’ increasing reliance on ‘RegTech’ technology to automate fraud checks and communicate data to regulators may need unified guidelines to encourage wider adoption. RegTech is used by banks to comply with anti-money laundering checks on consumers, monitor transactions for fraud, submit data to regulators regarding capital levels, and determine if customers can afford a loan. It is part of a larger trend of digitalising banking.
It eliminates human error and speeds up regular procedures, according to a paper released on Tuesday by the European Banking Authority (EBA).
However, the lack of clear regulatory standards across EU states for a developing subsector, according to the EBA, could stymie greater market adoption of RegTech.
“There is a need for efficient knowledge exchange and for regulators and supervisors to continue to improve their knowledge and abilities on RegTech,” the EBA stated.
“Additional initiatives, such as the formation of a centralised EU database of RegTech solutions or a potential certification of RegTech… could be further examined and considered at the EU in the medium term,” it stated.
However, the majority of the barriers to wider use of RegTech are found within banks and RegTech firms, and it would be up to them to take action, according to the watchdog.
According to the EBA, these include maintaining proper data quality, internal governance mechanisms, and knowledge of RegTech.
When it comes to formulating rules or overseeing lenders, the watchdog stated that it is devoted to “neutrality” regarding bank technology. This means that no single technology is preferred or discriminated against.
In the fourth quarter, the Paris-based authority will host a public online webinar to present and discuss the report’s key conclusions.
(Huw Jones contributed reporting, and Mark Potter edited the piece.)
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