Regulatory technology (RegTech) refers to the application of innovative technological solutions to regulatory processes within the financial system with the main aim of enhancing efficiency in regulatory practices through digitalisation of manual reporting and compliance processes.
The Bank of Lithuania‘s role in fostering RegTech
The objective of the Bank of Lithuania is to promote technological development in the financial system by creating added value for consumers of financial services and financial market participants. We offer and create solutions based on real needs. The main directions in which the Bank of Lithuania could implement RegTech solutions have been refined in discussions with the financial market, representatives of the information technology, academic community, the public sector. The market’s feedback has helped understand the challenges faced by financial institutions and the potential role we can play in addressing this issue.
Application of RegTech solutions for reporting and other functions
The Bank of Lithuania implemented a smart e-licensing tool that allows potential financial market participants to remotely apply for a licence in faster, easier and less expensive manner. At present, the tool can be used to apply for practically all types of licences.
The new system automatically generates a list of necessary documents as well as provides explanations on how and what information should be disclosed. It also allows applicants to save a partially completed form and come back to it once all relevant information and documents are ready. All this is done remotely, logging in to the system using internet banking or other login methods supported by the E-Government Gateway, which is especially handy for foreign businesses wishing to set up in Lithuania as all paperwork is done entirely online. The system will show the status of the submitted documents at any given time. This saves time for both the applicant and the regulator since only properly formed applications are deemed fit for examination. In addition, applicants will no longer be required to submit copies of the original documents.
This tool was one of the factors that led the Bank of Lithuania to win the Catalyst Award at the prestigious awards of Central Banking magazine.
Dispute resolution tool
In 2016, the Bank of Lithuania implemented a smart complaint and dispute resolution tool aimed at increasing the efficiency of internal processes (SupTech). This tool consists of two parts: a complaint and dispute submission platform and an internal database integrated into the website. It allows effective management of information related to consumer disputes, analysis, exporting of the depersonalised results of disputes to the website. In addition, RPA (robotic process automation) technologies have been introduced in the dispute resolution process, so some documents are produced automatically.
This tool has been observed and evaluated in the World Bank review: World Bank. 2018. From Spreadsheets to Suptech: Technology Solutions for Market Conduct Supervision. World Bank, Washington, DC
Approval of regulatory decisions and publication of information on the decisions adopted
With a view to more effective regulation, closer cooperation between supervisory authorities and a lower administrative burden for financial market participants, the Bank of Lithuania proposes to create a platform – the Register of Reliable RegTech Service Providers – which would connect financial institutions with RegTech entities and consider the supervision of the provision of these services in order to strengthen confidence in technology-based solutions.
In discussions with financial market participants, having refined the challenges of regulatory compliance by using RegTech solutions, we assess the fact that the formation of such a register is meaningful not at the level of individual jurisdictions, but at the level of the entire European Union.
Against this background and in response to the European Commission’s consultations on the development of the digitalisation of financial services in Europe, the Bank of Lithuania invites to take action at the EU level in order to set registration or certification requirements for RegTech tools that can operate across borders and be adapted in different jurisdictions.
For example, the powers of the European institutions could be extended, therefore, the Bank of Lithuania actively participates in the committees and working groups of the European Banking Authority (EBA), the Single Supervisory Mechanism (SSM), the European Insurance and Occupational Pensions Authority (EIOPA), the European Securities and Markets Authority (ESMA) and the working groups that are in charge of innovation so that such an issue can be included in the agendas of these institutions.
The EBA has now launched a RegTech Industry Survey, which invites all stakeholders to share their views and experiences on the use of RegTech solutions.
With this survey, which will run until 30 September 2020, the EBA aims to:
- map and understand the existing RegTech solutions;
- identify the main barriers and risks related to the use of RegTech solutions; and
- identify potential ways to support the uptake of RegTech across the EU
Promotion of initiation and application of RegTech decisions in Lithuania
Automatisation of reporting
The Bank of Lithuania, together with its partners, developed and tested a RegTech solution, which would allow to automate the accountability of financial market participants and reduce the administrative burden. After the implementation of the decision, the Bank of Lithuania could automatically receive detailed primary (operations) data, while financial institutions would save time and reduce human resources costs and investment in information technologies.
RegTech issues were discussed during the Digital Finance Outreach – Lithuania event “The Digital Finance Outreach – Lithuania”, dedicated to digital innovations in the financial sector, which took place in Vilnius on 20 May 2020. More information