On 21 September 2017, ECB published a consultation for draft guides to bank licensing and fintech bank licensing.
The main aim of the bank licensing guide is to provide useful guidelines and standards covering license application in general; to provide an overview of application process, enhance the transparency of the assessment process and increase the understanding of applied criteria for license applicants.
This Guide should be used in conjunction with the general ECB guides related to assessment of license applications. The policies presented in this guide, that apply to the licensing of any bank within the Single Supervisory Mechanism (SSM) could be applied to licensing of the fintech bank.
The guide applies to all license applications for becoming a credit institution, including but not limited to, initial authorizations for credit institutions, applications from fintech companies, authorizations in the context of mergers or acquisitions, bridge bank applications and license extensions.
This guide regulates general licensing principles, the scope of licensing requirements and assessment of license applications, procedural considerations and withdrawal and lapsing of licenses.
The fintech guide in general, considers the capacity of an applicant to gain a license and provides operational guidance for the supervisory assessment of license applications from credit institutions with a fintech business model. The guide exclusively refers to bank business models in which the production and delivery of banking products and services are based on technology-enabled innovation.
This guide refers not only to fintech banks but also to specialized subsidiaries of existing credit institutions with a fintech business model.
The guide covers detailed examination for process of the supervisory assessment particularly relevant to the specific nature of banks with fintech business models, but can equally apply to banks with traditional business models. These policies were adopted without prejudice to national and EU law requirements and the technical standards of the European Banking Authority (EBA).
Examples of these specific aspects include whether their management bodies have relevant skills and knowledge relating to technology, which could take the form of the appointment of a Chief Technology Officer as a member of the Executive Board.
The guide to assessment of fintech credit institution license application is structured to regulate four areas:
- Governance (suitability of the members of the management body and suitability of shareholders, the structural organization regarding credit risk approval and governance, IT-related risks, outsourcing including cloud services and data governance);
- Internal organization (risk management, compliance and audit frameworks);
- Programme of operations; and
- Rules governing capital, liquidity and solvency.
The guides are not binding but are tools reflecting new developments and the experience gained in practice. Additionally, they set out the bank models recommended to follow this guidance in order to facilitate application procedures for all potential applicants.
