Lowering barriers to expansion and entry
Tandem Bank (authorised in November 2015) is a digital-only bank that is retail will operate your own finance guide which compares financial products provided by both Tandem and its competitors. Other banks that are innovative in the pipeline for authorisation.
Other initiatives to guide new and innovative firms
The Bank of England supports innovation in financial services through its strive to promote innovative research and 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 new technology in the provision of UK banknotes.
Research and analytics
The financial institution launched its One Bank Research Agenda initiative in February 2015 to try and understand and develop innovative practice that is best in central banking, taking into account technological, institutional, social and environmental change.
It aims to facilitate dialogue that is open the lender and the research community to guide innovation and inform the Bank’s work. The lender has put up a study Hub division to aid drive this forward and developed an innovative new online blog, Bank Underground.
The initiative www.domyhomework.services 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 fundamental change.
In particular the fundamental change workstream takes a longer term glance at how technological (as well as other) innovations might affect central banking over a lengthier 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.
The Bank publishes new datasets to facilitate external research as part of its broader research agenda. This includes long haul historical 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 even more of the Bank’s data to your public.
The Bank in addition has put up an advanced analytics division and data lab to exploit new and innovative analytical tools and techniques, analyse new data sources such as for example social media, and help spread practice that is best when you look at the analysis of the latest big datasets both outside and inside the financial institution.
The division is also developing relationships with external partners of this type, and recently ran a data visualisation competition to engage with data scientists and students across the UK.
In the payments space, the Bank is conducting research into innovations in payments technology, with a particular focus on digital currencies plus the distributed ledger systems that underpin them.
This builds from the Quarterly Bulletin articles published by the lender in 2014, which considered the technical architecture of digital currencies, together with economic theories that govern how they work.
Polymer banknotes
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 plastic that is flexible which has benefits in addition to current paper banknotes.
Polymer notes are cleaner and more durable – they truly are more resistant to moisture and dirt, more environmentally friendly and last at least 2.5 times more than paper banknotes. Polymer notes may also be more secure, with advanced security features that provide a step-change in counterfeit resilience. The design that is full of Ј5 note will be unveiled on 2 June and the banknote introduced in September 2016, using the Ј10 note issued in 2017, and Ј20 note by 2020.
Use of Bank of England facilities
The lender has broadened the number of collateral accepted in its market operations to now include residential mortgages, asset finance, personal loans, automobile financing, corporate loans, SME loans and revolving credit facilities.
This allows access for a wider selection of counterparties – over 80 banks and building societies will have assets placed during the Bank, ready for use in initiatives such as the Funding for Lending Scheme. Work is underway to ensure there are not any technical obstacles to the Bank’s capacity 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 financial institution recognises the challenges Islamic banks face in meeting liquidity requirements aided by the current range that is limited of – existing facilities are not Shari’ah compliant as they involve interest-bearing activity. The financial institution in addition has become an associate member of the Islamic Financial Services Board (IFSB ).
In its provision of payment services, the lender has introduced prefunding for Bacs and Faster Payments, which lowers barriers to entry for banks and building societies trying to become members of these payment schemes.
Previously, an associate of these schemes needed to hold securities as collateral and commit to a mutual loss-sharing framework. Prefunding allows each institution to handle their exposure limit using reserves at the financial institution.
In January 2016 the lender announced its want to design a blueprint money for hard times for the UK’s high value sterling settlement system – the actual Time Gross Settlement System (RTGS ). The Bank will look to redesign RTGS in such a manner that its resilience is further enhanced, while at the same time enabling innovation.
2.8 How services that are financial are better utilising new technologies to come up with efficiency savings and reduce burdens on business – RegTech
Regulators not just have a job to relax and play in promoting competition and innovation, but also in making use of technological advances to reduce regulatory burdens on firms and drive efficiency savings. The FCA and PRA have already been particularly centered on this problem.
Firms need certainly to meet higher regulatory standards and greater reporting requirements after the crisis that is financial. New technologies that help firms better manage these regulatory requirements and lower compliance costs (so-called RegTech) are good for effective competition and innovation.
The main focus of those were to understand:
The goal of this consultation is always to seek views from the work of financial services regulators to guide 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 federal government invites responses from all interested parties, in particular both regulated and unregulated firms and innovators when you look at the financial services sector, in the following questions that are specific.
- Does the UK’s regulatory environment for 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 in the sector?
- Any kind of gaps in approach or places where financial services regulators should always be doing more to support technology that is innovative disruptive business models in financial services?
- Can there be more that financial services regulators could do to better utilise new technologies to produce their work that is own more?
3.2 Just how to respond
This consultation will run from 22 April to 6 May 2016.
Responses ought to be sent by email to Innovation plan consultation.
Alternatively please send responses by post to:
Innovation Plan consultation
Banking and Credit team
HM Treasury
1 Horse Guards Road
London SW1A 2HQ
When responding, please say if you should be making a representation on the part of a business, individual or representative body. Into the case of representative bodies, please provide info on the amount and nature of men and women you represent.
3.3 Confidentiality
Information provided in response to this consultation, including information that is personal, may be published on disclosed prior to the access to information regimes. They are primarily the Freedom of Information Act 2000 (FOIA), the info Protection Act 1988 (DPA) therefore the Environmental Information Regulations 2004.
If you prefer the info which you provide to be treated as confidential, please be conscious that, beneath the FOIA, there is a statutory code of practice with which public authorities must comply and which deals with, amongst other stuff, obligations of confidence. In view for this it would be helpful in the event that you could explain to us why you regard the information and knowledge you have provided as confidential.
We will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances if we receive a request for disclosure of the information. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on HM Treasury.
HM Treasury will process your individual data according to the DPA and in nearly all circumstances this will imply that your private data will not be disclosed to third parties.