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Nadia Manzari

03/2017 Head of the Innovation, Payments, Markets Infrastructures and Governance Department

Luxembourg,

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a. Definition of Fintechs b. CSSF’s regulatory approach towards financial technology c. The CSSF challenges d. Organization e. Future of FinTech: PSD 2

Introduction

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A business model where the production and delivery of financial services is based on technology.

disruptive or not

transferring value via a new technology, operating a financial service?

providing financial infrastructure services to the financial industry?

Definition of FinTechs

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• any technological innovation in the financial sector

• disruptive or not

Definition of FinTechs

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CSSF is in FinTech since 2007

• Payment service directive 1

• Work of the supervisor fundamentally changed

• The financial sector actors fundamentally changed

CSSF’s regulatory approach towards financial technology

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• The CSSF was one of the first regulators in Europe to adopt a

clear position with regards to virtual currencies in February 2014. This position has been confirmed by the European court of justice in October 2015.

• A first exchange platform enabling customers to exchange Bitcoins against EUR and USD between them and vice versa, has been authorized by the Luxembourg Minister of Finance, on 19 April 2016.

CSSF’s regulatory approach towards financial technology

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• Currently the CSSF investigates how and under which

conditions public clouds could be used by regulated entities of the financial sector. In order to do this, the CSSF closely works with some big cloud providers willing to comply with financial regulators expectations.

• The CSSF has no Innovation Hub but an Innovation department since April 2015

CSSF’s regulatory approach towards financial technology

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• With regards to the distributed ledger technology the CSSF

observes closely the latest trends in the industry.

• RegTech, or regulatory technology is another aspect of FinTech, describing the use of technology, specifically information technology (IT), in the context of regulatory monitoring, reporting and compliance.

• New models of “FinTech banking”.

CSSF’s regulatory approach towards financial technology

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• With regards to the distributed ledger technology the CSSF

observes closely the latest trends in the industry.

• RegTech, or regulatory technology is another aspect of FinTech, describing the use of technology, specifically information technology (IT), in the context of regulatory monitoring, reporting and compliance.

• New models of “FinTech banking”.

CSSF’s regulatory approach towards financial technology

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• Having a balanced approach toward financial regulation trying to

apply an existing regulatory framework in a proportionate way and in remaining technological neutral

• Determine the potential benefits of the submitted innovation and

whether there could be regulatory barriers linked to the innovative character of the business model we could address without circumventing the regulatory requirements

The CSSF challenges

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• Identify potential risks, cyber risks, fraud and AML/FT risks which have to be properly assessed and for which mitigants have to be applied

The CSSF challenges

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• The CSSF has no Innovation Hub but an Innovation

department since April 2015

• Sandbox v. pilot testing

Organization

Executive Board Secretariat D. Mander

Internal Audit M.-A. Schaeffer

Risk Management V. Lecointe

Information Security F. Girard

C. Marx Director General

General Secretariat D. Berna-Ost

PSF Application Guidance and Regulation

G. Pescatore

Consumer Protection/Financial Crime

J.-F. Hein

General Affairs M. Limpach

On-site inspection (non-banks) P. Wagner

International Affairs J.-M. Goy

Public Oversight of the Audit Profession

F. Tabak

Accounting, Auditing and Transparency

D. Goedert

S. Delcourt Director

International, Regulation and Enforcement I. Greischer

Authorisation and Supervision of AIFs

M. Friob

Authorisation and Supervision of UCITS and Pension Funds

J.-P. Heger

Authorisation and Supervision of IFMs and securitisation

undertakings P. Berchem

Prudential Supervision and Risk Management

A. Hoscheid

Coordination of the UCI Departments’ Specific IT Tools

C. Steinbach

UCI Operations C. Steinbach

UCI On-Site Inspections L. Schletzer

Cross-Departmental Coordinator

S. Letsch

Supervision of Specialised PFS C. Felicetti

C. Simon Director

Supervision of Banks F. Bisdorff

SSM (Single Supervisory Mechanism)

C. Campill

On-Site Inspection (banks) P. Wagner

Depositor and Investor Protection L. Goergen

F. Kauthen Director

MAF I A. Zimmer

MAF II M. Wampach

Supervision of Investment Firms

M. Weitzel

Innovation, Payments, Market Infrastructures and Governance

N. Manzari

Supervision of Information Systems and Support PFS

D. Hagen

J.-P. Faber Director

Personnel, Administration and Finance

A. Oestreicher

Information Systems of the CSSF

A. Ottavino Legal department

UCI Departments Supervision of Securities Markets Departments

Executive Board

Organisation chart of the CSSF’s Executive Board

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GT FinTech Composed of CSSF experts & industry experts

CSSF’s regulatory approach towards financial technology

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Fintech Ecosystem

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• Payment service directive 2 is preparing for a new evolution

in payments and consequently in FinTechs too • The new payment services directive will allow third party access

to accounts, the use of API’s to connect merchant and the bank directly and the ability to consolidate account information in 1 portal. These developments will disrupt current payment services in

Europe.

Future of FinTech: PSD 2

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• FinTech developments are calling for a new perspective on

supervision.

• FinTechs needs the supervisory authorities to respond promptly and to communicate clearly on authorization applications.

Future of FinTech: PSD 2

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Thank you for your attention

Disclaimer: The views expressed in this presentation are those of the presenter only. Official positions of the CSSF are determined only after extensive due process and deliberation.

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