Lowering barriers to entry and expansion
Tandem Bank (authorised in November 2015) is a digital-only retail bank that will operate an individual finance guide which compares financial loans offered by both Tandem as well as its competitors. Other innovative banks are in the pipeline for authorisation.
Other initiatives to support new and innovative firms
The Bank of England supports innovation in financial services through its strive to promote research that is innovative data analytics in central banking, and improving the ability of innovative firms to get into Bank of England facilities. The financial institution has also embraced technology that is new the provision of UK banknotes.
Research and analytics
The Bank launched its One Bank Research Agenda initiative in February 2015 to try to understand and develop innovative best practice in central banking, taking into consideration technological, institutional, social and environmental change.
It is designed to facilitate dialogue that is open the Bank together with research community to support innovation and inform the Bank’s work. The Bank has set up an investigation Hub division to help drive this forward and developed a unique online blog, Bank Underground.
The initiative covers research questions on five broad themes: policy frameworks and interactions; evaluating regulation, resolution and market structures; policy operationalisation and implementation; new data, methodologies and approaches; and reaction to change that is fundamental.
In particular the fundamental change workstream takes a longer term have a look at how technological (along with other) innovations might affect central banking over a longer horizon. This can include, for instance, examining the impact of digital currencies or finance that is alternative, and any associated economic, technological and regulatory challenges.
As part of its broader research agenda, the lender publishes new datasets to facilitate external research. This includes run that is long data, the lender of England’s balance sheet and data recorded because of the Bank’s regional agents. The long-term plan is to open up even more of this Bank’s data into the public.
The Bank in addition has set up an enhanced analytics division and data lab to exploit new and innovative analytical tools and techniques, analyse new data sources such as for example social networking, and help spread practice that is best in the analysis of the latest big datasets both outside and inside the financial institution.
The division is relationships that are also developing external partners of this type, and recently ran a data visualisation competition to engage with data scientists and students throughout the UK.
Within the payments space, the Bank is conducting research into innovations in payments technology, with a specific focus on digital currencies and also the distributed ledger systems that underpin them.
This builds regarding the Quarterly Bulletin articles published by the lender in 2014, which considered the technical architecture of digital currencies, plus the economic theories that govern how it works.
Following extensive consultation that is public the Bank announced in December 2013 that new Bank of England banknotes will now be printed on polymer. Polymer is a thin and flexible plastic material that has benefits over and above current paper banknotes.
Polymer notes are cleaner and much more durable – these are generally more resistant to dirt and moisture, more environmentally friendly and last at the least 2.5 times more than paper banknotes. Polymer notes may also be more secure, with advanced security features that offer a step-change in counterfeit resilience. The full design of the Ј5 note is going to be unveiled on 2 June plus the banknote introduced in September 2016, utilizing the Ј10 note issued in 2017, and Ј20 note by 2020.
Access to Bank of England facilities
The lender has broadened the range of collateral accepted in its market operations to now include residential mortgages, asset finance, unsecured loans, automobile financing, corporate loans, SME loans and credit that is revolving.
This allows access for a wider selection of counterparties – over 80 banks and building societies currently have assets placed during the Bank, ready for usage in initiatives like the Funding for Lending Scheme. Work is underway to ensure that there aren’t any obstacles that are technical the Bank’s ability to accept equities as collateral should the need arise.
The Bank commenced work in 2015 to assess the feasibility of establishing a Shari’ah compliant facility as part of its strategy to broaden liquidity provision in the market.
The lender recognises the challenges Islamic banks face in meeting liquidity requirements with all the current limited variety of options – existing facilities are not Shari’ah compliant as they involve interest-bearing activity. The Bank has also become an member that is associate of Islamic Financial Services Board (IFSB ).
The Bank has introduced prefunding for Bacs and Faster Payments, which lowers barriers to entry for banks and building societies looking to become members of these payment schemes in its provision of payment services.
Previously, an associate of these schemes had to hold securities as collateral and invest in a mutual loss-sharing framework. Prefunding allows each institution to handle their exposure limit using reserves at the financial institution.
In January 2016 the financial institution announced its want to design a blueprint money for hard times regarding the UK’s high value sterling settlement system – the true Time Gross Settlement System (RTGS ). The Bank can look to redesign RTGS in such a way that its resilience is further enhanced, while as well enabling innovation.
2.8 How financial services regulators are better utilising new technologies to build efficiency savings and lower burdens on business – RegTech
Regulators not merely have a task to relax and play to advertise competition and innovation, but additionally in using advances that are technological reduce regulatory burdens on firms and drive efficiency savings. The FCA and PRA have now been particularly dedicated to this issue.
Firms have to meet higher regulatory standards and greater reporting requirements after the economic crisis. New technologies which help firms better manage these regulatory requirements and minimize compliance costs (so-called RegTech) are great for effective competition and innovation.
The main focus of these were to understand:
The objective of this consultation is always to seek views regarding the work of financial services regulators to aid innovative technology and disruptive business models, and understand where there could be gaps in regulatory approach in terms of innovation that is supporting.
3.1 Consultation questions
The federal government invites responses from all interested parties, in particular both regulated and unregulated firms and innovators in the financial services sector, on the following questions that are specific.
- Does the UK’s environment that is regulatory financial services effectively support innovation?
- Do financial services regulators understand innovation in financial services and potential areas where new technologies and business that is disruptive buy an essay might emerge in the sector?
- What are the gaps in approach or places where financial services regulators must certanly be doing more to support innovative technology and disruptive business models in financial services?
- Will there be more that financial services regulators could do to better utilise new technologies to provide their work that is own more?
3.2 How to respond
This consultation will run from 22 April to 6 May 2016.
Responses should always be sent by email to Innovation plan consultation.
Alternatively please send responses by post to:
Innovation Plan consultation
Banking and Credit team
1 Horse Guards Road
London SW1A 2HQ
When responding, please say if you should be making a representation on behalf of a small business, individual or body that is representative. When you look at the full case of representative bodies, please provide information about the number and nature of people you represent.
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