What are some ways in which a bank can prevent regulators from derailing its fintech initiatives?

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Jill Castilla, president and CEO of Citizens Bank of Edmond, located in Edmond, Okla., recently said that Citizens had devised a distinct strategy for limiting the bank’s regulatory risk from fintech projects. What are some ideas for limited this risk and cultivating a better relationship with regulators?

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Posted by (Questions: 10, Answers: 4)
Asked on March 18, 2016 11:04 am
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We involve our risk and compliance people as early on in the process as possible to prevent last-minute derailing of projects they’ve never heard of. We are also collaborating with them to change their thinking – everything is black or white – so that they are open to alternative approaches that may not be expressly stipulated in regulations or guidelines. And to be flexible enough to change as risks and technology evolve. But it’s not just about limiting regulatory risk, it’s also about ensuring your controls don’t impact your customers and that you consider the risk versus the impact before implementing anything. Banks should definitely be engaging with Regulators more deeply, and this includes challenging regulations (some are outdated or old school and some guidelines are pretty onerous). But rather than just complaining, suggest alternatives. Perhaps an open forum that includes regulators, fintechs and banks/financial services companies so that everyone is working towards the same goal.
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Posted by Jen Sutherland
Answered on April 13, 2016 4:48 am
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With every innovation, comes the task of risk management. The Banks Risk management team needs to be proactive in identifying possible risks that may arise through out the new product lifecycle. A good risk manager should also not be about killing ideas with identified risks but also looking for ways to address the identified possible risks. Addressing Regulators fears might also be possible by weighing the possible risks with the possible value to the larger group but ultimately presenting the mitigants to the identified risks.
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Posted by Josh
Answered on April 12, 2016 4:36 pm
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We had the experience in Malaysia that local banks must have all apps reviewed by the central bank/regulator. That is an extreme example of why this risk exists when regulators don’t have clear guidelines/frameworks. What banks should be doing is engaging with their regulators to agree and publish clear guidelines for compliance. I know that for example in Australia, the government has published clear (if onerous) guidelines on data security for government cloud applications with a straightforward review process. A similar set for Financial services should not be difficult especially as some frameworks already exist (think PCI).
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Posted by Sharpie
Answered on April 13, 2016 2:33 am
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