{"id":36350,"date":"2018-05-29T00:00:00","date_gmt":"2018-05-28T22:00:00","guid":{"rendered":"https:\/\/aebanca.es\/actualidad\/te-interesa\/aeb-informa\/our-position-on-a-regulatory-sandbox\/"},"modified":"2026-04-09T09:50:10","modified_gmt":"2026-04-09T07:50:10","slug":"our-position-on-a-regulatory-sandbox","status":"publish","type":"blog-aeb","link":"https:\/\/aebanca.es\/en\/actualidad\/te-interesa\/aeb-informa\/our-position-on-a-regulatory-sandbox\/","title":{"rendered":"Our position on a regulatory sandbox"},"content":{"rendered":"<p><strong>Introduction<\/strong><\/p>\n<p>The introduction of new, innovative products and services is always driven by companies with a <em>test-and-learn<\/em> approach. However, in the financial industry this approach faces certain challenges: <\/p>\n<ul>\n<li>The complex regulatory framework for financial institutions, and in particular deposit-taking institutions, makes it difficult to implement this approach due to the compliance costs associated with market testing new products and services.<\/li>\n<li>It is also sometimes complex, in the early stages of technological developments or new business models, to understand how they fit within the regulations or the existing supervisory framework. It may even be the case that the rules in force do not address the implications of innovations for consumers or users, institutions, and the system as a whole. <\/li>\n<li>Likewise, given the importance of trust in this sector, the reputational risk faced by established institutions or companies if an innovative product does not function properly is a factor to be taken into account.<\/li>\n<\/ul>\n<p>In the new <em>Fintech<\/em> era, regulatory and supervisory authorities also face new challenges. In particular, it is necessary to find an agile and flexible way to ensure that innovation in the financial sector is compatible with the basic principles of consumer protection, financial stability and market integrity set out in the regulations. There are two alternatives: do nothing about it, or allow companies to innovate and enter the market without any form of control. The first entails two main risks. On the one hand, it would condemn the banking sector to lose competitiveness and its capacity to innovate, compared with institutions in other countries with frameworks more geared towards financial innovation, or compared with new entrants subject to more lenient regulatory and supervisory frameworks. On the other hand, it would discourage virtuous circles of cross-sector innovation that can significantly shape the country\u2019s position in terms of growth and modernisation. The second, by contrast, in principle supports innovation, but compromises consumer protection, financial stability and market integrity\u2014fundamental pillars of the regulation agreed by national and supranational authorities in recent decades.      <\/p>\n<p>In several countries, supervisory authorities have already implemented instruments to respond to the innovation needs of financial-sector products and services, open to participation by both licensed firms and those that need to obtain a licence.<\/p>\n<p>One of the instruments gaining the greatest traction among authorities in different countries is the establishment of a regulatory testing ground or <em>sandbox<\/em>. A regulatory <em>sandbox<\/em> is a special set of rules that allows companies to test their innovative products and services in a safe, limited environment, with the possibility of obtaining exemptions from certain requirements of the regulatory or supervisory framework, or assurances in cases of regulatory uncertainty. In other words, tests in a <em>sandbox<\/em> can be carried out with a full or partial exemption from certain regulatory requirements, or with a written commitment from the authorities not to take action against participating companies, provided they comply with the agreed conditions. Once the testing period has ended, solutions may be discarded or introduced into an unrestricted environment\u2014that is, launched to market.   <\/p>\n<p>The Spanish banking industry supports the idea of creating a <em>sandbox<\/em> in Spain that enables banks and companies wishing to offer innovative financial services to develop products in this type of environment. It should be noted that Spanish banking believes that, insofar as banking business and digitalisation are global and cross-border in nature, in the medium term it will be necessary to have a common European <em>sandbox<\/em> framework, limiting regulatory arbitrage that may arise from the different treatment of testing environments in each country. We understand, however, that until this EU initiative becomes a reality, Spain must adopt its own national solution in order not to lose competitiveness vis-\u00e0-vis other markets and companies, and it should be coordinated as closely as possible with similar developments in Europe. In addition, the Spanish regulatory <em>sandbox<\/em> may be an appropriate solution for those companies that, at least initially, only intend to apply their innovation in the Spanish market.   <\/p>\n<p>As the financial authorities are still reflecting on the characteristics that the future Spanish <em>sandbox<\/em> should have, this position paper aims to convey the banking industry\u2019s views on the matter<em>.<\/em><\/p>\n<p><strong>A sandbox or testing ground for the Spanish market<\/strong><\/p>\n<ul>\n<li><strong><em>Purpose and means<\/em><\/strong><\/li>\n<\/ul>\n<p>One of the key aspects when introducing a <em>sandbox<\/em> or testing ground in the Spanish market is to clearly establish its purpose and identify its potential as a tool serving regulators and supervisors, participants and, ultimately, end users of financial services. To this end, several aspects must be taken into account regarding its purpose, value and implementation: <\/p>\n<p>The <em>sandbox<\/em> is not intended to lower regulatory standards <em>per se<\/em>. On the contrary, consumer protection is one of the reasons that justify it (testing new technologies with a small group of volunteer customers who have given their full consent, and with safeguards for consumers and users against potential incidents). The idea is to seek proportionality in regulation during the experimentation phases of new technologies and business models, so that regulation does not become an obstacle to innovation.  <\/p>\n<p>What matters is that participating companies, as well as regulators and supervisors, learn and gain experience from these pilot tests and assess how to bring them into real-world operation, for the benefit of consumers or end users. The former understand the basic rules and can benefit from the supervisor\u2019s advice on potential risks and how to mitigate them. The latter, by contrast, can obtain highly valuable information. The supervisor can take the pulse of the market first-hand from the early stages of the innovation process and, on that basis, assess the implicit risks, the advantages of new products and the possible existing regulatory barriers to bringing a specific innovative project to market. This analysis would make it possible to identify and implement changes in supervisory or regulatory practices in order to facilitate innovation where it benefits consumers. Ultimately, <em>sandboxes<\/em> can help financial authorities as much as the companies developing the projects.     <\/p>\n<p>In the EU context, it may be necessary to consider how the conclusions that national authorities draw from their local experiences should be transferred to the EU framework, thereby leveraging cross-border synergies and avoiding future regulatory arbitrage.<\/p>\n<p>To truly harness the potential benefits of introducing a <em>sandbox<\/em>, sufficient technical and human resources are required within the authorities responsible for its management\u2014along with coordination among the different authorities\u2014for proper implementation and oversight. Without adequate resourcing for its launch, the potential of a <em>sandbox<\/em> may be diminished, missing the opportunities it offers the national market in terms of innovation and competitiveness. <strong><em> <\/em><\/strong><\/p>\n<ul>\n<li><strong><em>Participants<\/em><\/strong><\/li>\n<\/ul>\n<p>As is the case in most <em>sandboxes<\/em> already in operation, in Spain participation should include both authorised (licensed) and unauthorised (unlicensed) providers of financial services.<\/p>\n<p>We believe that all of them\u2014whether new entrants or <em>incumbents<\/em>\u2014share the same objective of testing the viability of an innovative solution, and the same need to leverage the benefits of participating in the <em>sandbox<\/em>: eliminating regulatory uncertainty, reducing time to market for new products and services, and increasing investment opportunities.<\/p>\n<ul>\n<li><strong><em>Sandbox approach<\/em><\/strong><\/li>\n<\/ul>\n<p>Spanish banking considers it preferable for innovation projects eligible for acceptance into the sandbox to be assessed individually, determining on a case-by-case basis the most appropriate treatment for the testing period in the <em>sandbox<\/em>. We believe this alternative is preferable to a broad approach such as the Australian one, in which there is no such individual assessment, but rather a universal one under predefined parameters. The chosen individual assessment approach makes it possible to conduct a more specific analysis of the implicit risks and the most appropriate regulatory <em>waivers<\/em>.  <\/p>\n<ul>\n<li><strong><em>Entry conditions<\/em><\/strong><\/li>\n<\/ul>\n<p>One of the main decisions the regulator\/supervisor faces when implementing a testing ground is choosing the types of projects that may participate.<\/p>\n<p>Although there are different international approaches, in most cases it is the <em>sandbox<\/em> supervisor who sets the project assessment criteria with a certain degree of flexibility, focusing on two main pillars: innovation and regulatory uncertainty.<\/p>\n<p>For us, this approach is the most suitable for innovation in the national market. In our view, when assessing criteria for accepting projects, the supervisor should take the following issues into account: <\/p>\n<ul>\n<li>The project represents an innovation for the market or for a specific type of regulated provider, either by using a new technology or by applying an existing technology in an innovative way.<\/li>\n<li>The project offers a potential benefit for consumers and users.<\/li>\n<li>The project is at a stage of development that provides reasonable assurances of viability, and the applicant company is in a position to begin the testing phase in the short term and to comply with the requirements agreed with the authority.<\/li>\n<li>At least one of the following reasons justifies the need to enter the regulatory <em>sandbox<\/em>:\n<ul>\n<li>There is uncertainty about how to apply the existing regulatory framework;<\/li>\n<li>Approval requirements by regulators or supervisors delay testing the innovation with real customers;<\/li>\n<li>Complying with all regulatory obligations already at the testing stage is too slow and costly;<\/li>\n<li>The innovation conflicts with rules that were designed for a market prior to the emergence of the new technology.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>It should be noted that the focus of these assessment criteria must be broad enough to include, among the selected projects, innovations with indirect effects on consumers and users related to regulatory compliance, such as new <em>reporting<\/em> tools that deliver efficiency gains, improve risk management and generate indirect benefits for end customers.<\/p>\n<p><a href=\"https:\/\/aebanca.es\/wp-content\/uploads\/2018\/05\/aeb.17.07.04-sandbox-regulatorio-publico.pdf\">Download the document<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Spanish banking industry supports the idea of creating a sandbox in Spain that enables banks and companies wishing to offer innovative financial services to develop products in this type of testing ground.<\/p>\n","protected":false},"featured_media":36084,"parent":0,"template":"","etiquetas":[356],"categorias-blog":[780,781],"class_list":["post-36350","blog-aeb","type-blog-aeb","status-publish","has-post-thumbnail","hentry","etiquetas-sandbox","categorias-blog-articles","categorias-blog-newsarticles"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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