The European Commission (EC) needs to promote innovation, competitiveness, and resilience to help unlock the potential of new technologies for European capital markets, according to the Association for Financial Markets in Europe’s (AFME) new paper, European Capital Markets in the Digital Age.
In the paper, AFME notes that there needs to be a regulatory framework that support organisations as they adopt new technologies such as crypto-assets, artificial intelligence and cloud computing, harness the value from data, and address the challenges of cybersecurity and operational resilience.
The association highlighted the need for a “competitive and level playing field” that ensures all firms involved in financial services, including technology firms, adhere to the ‘same risk, same activity, same regulation’ principle.
The paper outlined three priority areas for European supervisors. The first is the development of a coordinated global approach to operational resilience to avoid placing unnecessary burdens on firms and prevent isolated incidents from becoming systemic.
Currently, the industry is grappling with a patchwork of operational resilience regulatory requirements such as reporting, testing regimes and certifications.
Second is to create an innovation-friendly structure that encourages new opportunities while managing risks. This entails identifying and addressing existing regulations which act as a barrier to both digitisation and improved operational resilience.
Last but certainly not least are European data-sharing initiatives to support innovation as well as a level-playing field. This includes ensuring sufficient data portability for individuals and firms to allow users to share their data on a real-time, ongoing, standardised, and secure basis.
The paper also calls for greater standardisation of data types and formats within and across sectors to drive greater efficiencies in data-sharing and analysis.
James Kemp, managing director, head of technology and operations at AFME, said: “Evolving technologies are enabling innovative financial products and services, improving the resilience of financial markets, and supporting new ways of working.”
He said, “It is important that consistently applied regulation supports these new technologies to unlock a vibrant and competitive digital single market and build stronger, more efficient capital markets infrastructures.”
“The COVID-19 pandemic has reinforced this requirement, demonstrating how technology and has underpinned the continued functioning and resilience of capital markets,” he added.