Vasiliauskas: Pan-European regulation must be based on national best practices
The EU regulatory initiatives have to be based on practices that have already been implemented by the EU Member States and proved effective. This is particularly important in terms of regulation of such emerging sectors as fintech as well as seeking to prevent financial risks, including those related to money laundering. Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, will present this position to EU policymakers during his visit to Brussels on 28 February.
“The European Commission’s determination to create a single market for digital financial services is definitely a welcome intention. However, we should resort to well‑established practices, instead of wasting time and effort on reinventing the wheel. In other words, EU-level decisions must be based on solutions that have already been implemented, verified and justified at the national level,” said Mr Vasiliauskas. He also stressed that the Bank of Lithuania has gained valuable experience in developing an innovation-friendly regulatory environment and has thoroughly analysed and assessed the challenges faced by fintech companies and their supervisors. “We are ready to share the know-how we acquired with other EU policymakers,” noted Mr Vasiliauskas.
In the third quarter of 2020, the Commission intends to present its Fintech Action Plan, setting out proposals to promote the development of digital financial services across the EU.
Lithuania’s fintech ecosystem currently includes 210 companies. Having created a fintech-conducive regulatory environment, Lithuania, along with the United States, United Kingdom, Singapore and Switzerland, ranks among the world’s top five fintech leaders. The Bank of Lithuania offers fintechs the possibility to test their products in its regulatory sandbox, consults potential market entrants, provides direct access to the central bank’s payment infrastructure and applies other tools intended for the development of the fintech sector.
However, an innovation-friendly approach does not entail less stringent regulatory standards. The threshold for quality and transparency requirements is very high – the Bank of Lithuania rejects nearly one-third of licensing applications submitted by fintech companies.
The rapid growth in the fintech sector not only boosts competition and enables companies to offer new-generation financial products to their customers, but may also pose additional risks, including those related to money laundering.
“Although the risk of money laundering in the Lithuanian financial system remains low, it certainly falls under our close scrutiny. Our experience in managing risks associated with innovative fintech companies as well as in developing new forms of cooperation between the public and private sectors (including commercial banks) should be particularly relevant to the Commission,” said the Chairman of the Board of the Bank of Lithuania.
In the first quarter of 2020, the Commission plans to publish its Anti-Money Laundering Action Plan, where it will provide proposals on strengthening the EU anti-money laundering framework and deepening cooperation between the public authorities across different jurisdictions.
In recent years, the Bank of Lithuania has significantly enhanced its in-house anti-money laundering capacities. It has been implementing modern digital tools in its supervisory processes, cooperating with foreign authorities and developing an information-sharing platform between the public and private sectors. The money laundering risks in the country’s financial system remain low, with non‑resident deposits amounting for merely 2.4% of total deposits, while money transfers to foreign (non-EU) countries account for a meagre 0.4% of total transfers.
During his visit to Brussels on 28 February, Vitas Vasiliauskas will meet with John Berrigan, European Commission’s Director-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), take part in a media briefing session as well as other bilateral discussions.