The Central Bank confirmed on Tuesday it will set up a so-called innovation sandbox programme later this year to allow financial and technology firms to test innovative products in a safe environment before launching them on the market.
The move comes 18 months after the Department of Finance said in a report on the banking system that the regulatory body should review its existing innovation hub and consider setting up a sandbox programme – similar to one offered in some other countries such as the UK – to allow companies test new products in a live setting.
The Central Bank set up its innovation hub in April 2018 to allow both start-ups and existing financial firms to engage with regulators as they develop financial innovations based on new technologies outside the formal supervisory process. The regulator said last November that 375 such engagements had taken place over the initial 5½ years of its existence, and that it planned to further develop this hub.
“In a changing financial system the Central Bank is evolving its approach to continue to ensure the financial system operates in the best interests of consumers and the wider economy,” said deputy Central Bank governor Sharon Donnery. “We can play an important role in harnessing the benefits of innovation while also managing the risks. Enhancing our engagement with innovation in financial services and delivering an innovation sandbox programme are important steps forward.”
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The planned sandbox and improved innovation hub “will help firms to build safeguards into their early-stage development, embedding a regulatory culture to ensure they are properly prepared for the responsibilities that come as regulated firms”, she said.
However, the Central Bank does not plan to offer firms any derogations or waivers from regulatory requirements.
Financial Services Ireland director Patricia Callan said the sandbox programme would make Ireland a more attractive location for financial services companies developing innovative new products.
“For early-stage firms the insights offered about operating in a regulated market will be of enormous assistance in developing their products,” she said. “This ultimately is to the benefit of consumers as financial services firms of all sizes continue to embrace fintech in order to deliver the best service.”
The regulator said the sandbox programme would take a “thematic approach” when it comes to testing innovation, and that the first themes and a call for potential participants will be issued in the coming months. The first programme will commence later this year, it said.
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