The Central Bank plans to set up a regulatory “sandbox” to allow financial and technology firms to test innovative products in safe environment before launching them on the market.
The move comes almost a year after the Department of Finance said in a report on the banking system that the regulatory body should review its existing innovation hub and consider setting up a “sandbox” programme – similar to one offered in some other countries, such as the UK – to allow companies to test new products in a live setting.
“Many of you have called for us to establish a sandbox. We have listened and we will do this,” Central Bank governor Gabriel Makhlouf told attendees at a conference hosted by the regulator in Dublin on Wednesday.
“Our sandbox will foster innovation in financial services so as to support better outcomes consistent with our public policy objectives. In line with our principle of transparency we want your views on our plans, the themes we should focus on and how we enhance our approach to innovation more generally.”
A consultation paper on the plan as well other efforts to develop the Central Bank’s existing so-called innovation hub was launched on Wednesday. Interested parties have until February 8th of next year to make submissions.
The Central Bank set up its innovation hub in April 2018 to allow both start-ups and existing financial firms to engage with regulators as they develop financial innovations based on new technologies outside the formal supervisory process. Some 375 such engagements have taken place over the past 5½ years.
However, there have been calls from various parties, including fintechs and the Competition and Consumer Protection Commission (CCPC), in recent years for the Central Bank to set up a full-scale regulatory sandbox scheme.
A sandbox system would allow regulators to “closely monitor and assess the potential risks and benefits while providing guidance and clarity for the firms involved”, the consultation paper said.
“Typically, the aim of sandboxes is to allow regulators and firms better understand the opportunities and/or risks posed by innovations, which may be monitored through a testing phase.”
