Post: ESAs recommend steps to improve activities of innovation facilitators across the European Economic Area

The three European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) today published a Report on innovation facilitators, a term encompassing innovation hubs and regulatory sandboxes. The Report identifies a number of benefits and challenges relating to the operation and design of such innovation facilitators and presents recommendations and considerations towards national competent authorities (NCAs), the ESAs and the European Commission to further enhance the role and efficiency of innovation facilitators in the financial sector across the European Economic Area (EEA).

Since the last Report in 2019, innovation hubs in the EEA have undergone improvements in their operations while maintaining their focus on enhancing firms’ understanding of the regulation and supervisory expectations. Regulatory sandboxes have offered the FinTech sector a safe environment to test their business ideas and allowed NCAs to stay abreast of emerging innovations in the financial sector and to better identify cases where a reassessment of regulatory perimeters may be needed.

To further improve the operation of innovation facilitators and to enhance the experience for participating firms, the NCAs are invited to:

improve their understanding of the concerns and interests of participating firms;
broaden the scope of innovations captured, including at the cross-sectoral level;
ensure an effective collaboration among NCAs;
continuously evaluate the functioning of innovation hubs and regulatory sandboxes.
Through the European Forum for Innovation Facilitators (EFIF) framework, the ESAs can provide recommendations for future EU-wide initiatives that focus on experimentation. To improve the functioning of this framework the ESAs should:

re-evaluate the procedural framework for cross-border testing established by the EFIF in 2021,
formalise the EFIF’s process to raise co-legislators’ attention to issues identified via innovation hubs or regulatory sandboxes.
Finally, the ESAs propose that the European Commission undertake a comprehensive reflection on the EU-wide strategy to support financial innovation and the operation of innovation facilitators, in particular regulatory sandboxes.

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