The Central Bank is “struggling to keep pace” with technological developments in the financial services sector, according to its head of consumer protection.
The financial sector has undergone significant change in the past number of years due to the proliferation of new entrants to the market.
A number of born-on-the-internet financial services firms have eaten into traditional providers’ market share in areas such payments, lending and fraud detection.
Bernard Sheridan, Central Bank director of consumer protection, said the pace of advancement creates difficulty for the bank and stretching its existing frameworks, however.
“As new technologies change the everyday provision and delivery of financial services for consumers it becomes more challenging for us as regulators to monitor what’s happening,” said Mr Sheridan.
“Our own regulatory rulebooks and supervisory tools are struggling to keep pace with developments.
“I think one big thing behind it all is do we simply look at the rulebooks we have or do we need to update them to reflect what’s going on?
“Or is there something more fundamental happening? There is uncertainty around the wider, long-term implications of fin tech [financial technology] and with uncertainty comes increased risk, and with increased risk comes an increased interest in the fin tech space by global bodies.”
Mr Sheridan said the bank was attempting to address the rapid developments in financial technology with a dual approach, both domestically and at a European level.
At a domestic level, its focus is on ensuring the bank’s existing framework is fit for purpose and monitoring emerging risks, he said.
The regulator is also looking to bring its experience to bear on policy discussion in Europe.
“Our role is really trying to bring our experiences into the European forum and influence what’s coming out of Europe,” said Mr Sheridan.
“You’ve European directives which take years to implement but what’s coming out of those directives is powers for the European supervisory authorities to introduce rules and that’s where the Central Bank is heavily involved at the moment trying to shape those rules.”
Some of the key concerns for regulators are the manner in which personal data is dealt with and the provision of automated device.
The Central Bank has identified cyber attacks and their potential impact on financial firms as one of the key threats to fin tech companies.
If a bank were “to succumb” to a cyber attack, the impact on consumers is somewhat of an unknown.
Mr Sheridan said additional resources have been allocated to fin tech within the Central Bank.
He said the bank’s consumer protection and prudential regulation departments had been bulked up in response to the emergence of fin tech.
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