ISDA Technology Forum: Regulators struggling to match pace of innovation
Regulators and policymakers are having a hard time keeping up with the glut of new technology appearing in the financial services space, according to a panel at the International Swaps and Derivatives Association (ISDA) Technology Forum in London on 6 November.
Caroline Dawson, partner at Clifford Chance, says that there has been a gap emerging between the development of technology and the ability to regulate them properly. “People are becoming concerned about the development of new products and where regulation fits around them.”
Nicole Sandler, innovation policy global lead at Barclays, adds that policymakers don’t have the luxury of time anymore, as there are new players and technologies making waves in the industry on a regular basis.
She believes that banks and regulators must work closely to enable these new technologies to be utilised properly. “At Barclays we don’t want to do anything without understanding the regulatory parameters. Regulators should have a role where they work very closely with the industry. I’m a huge fan of the Financial Conduct Authority (FCA) and what it has done with innovation and sandboxes.”
“It’s good for a financial institution to work alongside a regulator to test out their methods. We may all read the regulations differently so working together on this is valuable. What is even more valuable is that a regulator can understand what their rulings are hitting.”
Sandler states that people have been incorrectly trying to regulate technologies. Instead she argues that use cases should be investigated. “It’s not about regulating blockchain or regulating AI but looking at applications and that is where sandboxes can allow regulators to discover. If you’ve written regulations without considering this it can become a real challenge for institutions, as they won’t be able to understand the landscape and have a safety net to produce new use cases.”
Mai Santamaria, head of the financial advisory team at the Irish Department of Finance, says that changes are occurring extremely fast when compared to the pace that most regulators move at. “Developments are happening so fast that trying to match things up can seem impossible. On top of that you have to overlay an understanding of the technologies underlying the developments.”
Policymakers and regulators need time to understand the concepts and vocabulary needed to provide insight into the policymaking process, she adds.