Lowering barriers to expansion and entry
Tandem Bank (authorised in November 2015) is a digital-only retail bank that will operate a personal finance guide which compares lending options made available from both Tandem and its competitors. Other innovative banks are in the pipeline for authorisation.
Other initiatives to guide new and firms that are innovative
The Bank of England supports innovation in financial services through its strive to promote innovative research and data analytics in central banking, and enhancing the ability of innovative firms to gain access to Bank of England facilities. The Bank 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 practice that is best in central banking, taking into account technological, institutional, social and environmental change.
It is designed to facilitate open dialogue between the Bank and the research community to guide innovation and inform the Bank’s work. The Bank has put up a Research Hub division to greatly help drive this forward and developed an innovative new blog that is online 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 look at how technological (along with other) innovations might affect central banking over a lengthier horizon. This can include, as an example, exploring the impact of digital currencies or alternative finance providers, and any associated economic, technological and regulatory challenges.
The Bank publishes new datasets to facilitate external research as part of its broader research agenda. This consists of run that is long data, the Bank of England’s balance sheet and data recorded by the Bank’s regional agents. The long-term plan is to start up much more of the Bank’s data to the public.
The lender in addition has put up an enhanced analytics division and data lab to exploit new and innovative analytical tools and techniques, analyse new data sources such as for instance social media marketing, and help spread best practice in the analysis of brand new big datasets both outside and inside the lender.
The division is relationships that are also developing external partners of this type, and recently ran a data visualisation competition to activate with data scientists and students over the UK.
The Bank is conducting research into innovations in payments technology, with a particular focus on digital currencies and the distributed ledger systems that underpin them in the payments space.
This builds regarding the Quarterly Bulletin articles published by the lender in 2014, which considered the architecture that is technical of currencies, while the economic theories that govern how they work.
Following extensive public consultation, 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 which includes benefits in addition to current paper banknotes.
Polymer notes are cleaner and much more durable – they are more resistant to dirt and moisture, more environmentally friendly and last at the least 2.5 times longer than paper banknotes. Polymer notes will also be more secure, with advanced security features that offer a step-change in counterfeit resilience. The full design regarding the Ј5 note should be unveiled on 2 June while the banknote introduced in September 2016, aided by the Ј10 note issued in 2017, and Ј20 note by 2020.
Access to Bank of England facilities
The lender has broadened the product range of collateral accepted in its market operations to now include residential mortgages, asset finance, signature loans, auto loans, corporate loans, SME loans and credit that is revolving.
This enables access for a wider number of counterparties – over 80 banks and building societies now have assets placed in the Bank, ready for use in initiatives such as the Funding for Lending Scheme. Work is underway to ensure that there aren’t any technical obstacles to the Bank’s ability to accept equities as collateral if 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 financial institution recognises the difficulties Islamic banks face in meeting liquidity requirements using the current limited variety of options – existing facilities are not Shari’ah compliant as they involve interest-bearing activity. The lender has additionally become an associate member of the 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, a member of these schemes needed to hold securities as collateral and agree to a loss-sharing framework that is mutual. Prefunding allows each institution to manage their exposure limit reserves that are using the Bank.
In January 2016 the lender announced its want to design a blueprint for future years regarding the UK’s value that is high settlement system – the true Time Gross Settlement System (RTGS ). The lender will look to redesign RTGS in such a manner that its resilience is further enhanced, while at the same time innovation that is enabling.
2.8 How services that are financial are better utilising new technologies to generate efficiency savings and reduce burdens on business – RegTech
Regulators not merely have a role to play in promoting competition and innovation, but in addition in making use of technological advances to reduce regulatory burdens on firms and drive efficiency savings. The FCA and PRA have been particularly focused on this matter.
Firms need to meet higher regulatory standards and greater reporting requirements after the crisis that is financial. New technologies which help firms better manage these regulatory requirements and reduce compliance costs (so-called RegTech) are great for effective competition and innovation.
The focus of these were to know:
The purpose of this consultation would be to seek views on the work of financial services regulators to support innovative technology and disruptive business models, and understand where there can be gaps in regulatory approach with regards to innovation that is supporting.
3.1 Consultation questions
The government invites responses from all interested parties, in particular both regulated and unregulated firms and innovators in the financial services sector, on the following specific questions.
- 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 disruptive business models might emerge into the sector?
- What are the gaps in approach or areas where financial services regulators must be doing more to aid technology that is innovative disruptive business models in financial services?
- Is there more that financial services regulators could do to better utilise new technologies to produce their own work more effectively?
3.2 Simple tips to respond
This consultation will run from 22 April to 6 May 2016.
Responses should 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 are making a representation on the part of a company, individual or body that is representative. In the case of representative bodies, please provide home elevators the number and nature of people you represent.
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