The co-operation framework recognises that both the FCA and the JFSA share a “mutual desire to promote innovation in financial services in their respective markets”. To facilitate that, the JFSA and FCA will share information on emerging market trends and developments and regulatory issues pertaining to innovation.
The FCA has an existing system to support innovative FinTech firms wishing to gain access to the UK financial markets called ‘Project Innovate’. Through Project Innovate, the FCA offers support to new and existing businesses that wish to introduce innovative financial products, services or business models. This support takes the form of dedicated contacts, advice concerning the regulatory framework, an advice unit to support firms offering robo-advice services and the ‘Regulatory Sandbox’; a ”safe space” allowing firms to undertake limited market testing of their innovative solution. The JFSA also has its own innovation function aimed at promoting innovation within financial services and in turn greater competition.
The cooperation agreement with the JFSA is intended to support a referral network between FinTechs in Japan and FinTechs in the UK so they can operate in both countries. The framework is intended to allow firms which benefit from regulatory support in the UK to gain equivalent regulatory support in Japan, and vice versa. The regulator (whether in Japan or the UK) receiving the request from a FinTech firm wishing to gain access to their market will support the firm by providing:
- a dedicated point of contact for each FinTech business;
- assistance for the FinTech business in understanding the regulatory environment in that market;
- dvice to the FinTech business on making applications for approval;
- support to the FinTech business during the authorisation process; and
- regulatory support for one year after the FinTech business is authorised.
Importantly, the process will be open not only to firms that are currently receiving support, but also to firms that would qualify for this support, potentially opening the door to a wider pool of FinTech applicants.
This is an important step for the FCA in encouraging the spread of innovative FinTech solutions globally, and adds to existing agreements in place with regulators in Singapore, Hong Kong, China, the Republic of Korea, Ontario Canada and Australia. FinTech firms often face complex regulatory environments, which may deter investments in other jurisdictions, and firms wishing to understand how their technology could operate internationally are encouraged to take advantage of the reduced barriers to entry offered by this scheme.
The FCA’s announcement and the exchange of letters establishing the co-operation framework are available here.