On the same day that a federal appeals court delivered a death blow to the Labor Department’s fiduciary rule for retirement accounts, the counselor to the U.S. Treasury secretary offered a sneak peek of the department’s fourth and final report on the current financial regulatory system.
The report, like the three that preceded it, will serve as a basis for regulatory reform directed at specific parts of the financial system, namely financial technology and innovation and nonbank financial systems. Previous reports looked at banks and credit unions, capital markets, and asset management and insurance.
Speaking at a fintech conference in New York City on Thursday held by the Securities Industry and Financial Markets Association, Craig Phillips, counselor to the Treasury secretary, said the upcoming report, like the three before, will be pragmatic and offer specific actionable recommendations. He didn’t offer a time frame for its release, but a source close to the Treasury told ThinkAdvisor it will likely be released sometime this summer.
“The financial services landscape has over 3,300 new fintech companies” and “over 20% of all personal loans” originate in the fintech marketplace, said Phillips.
This “explosion” of technological capabilities in the financial sector reflects four trends, said Phillips:
- Nonbank sector responding opportunistically
- Startups using a tech-enabled approach to develop and deliver product
- Innovative platforms partnering with traditional financial institutions
- Increasing scale of competitors, raising the stakes for traditional financial firms.
“Adapt or die” is the result, said Phillips.
“We need a new approach by regulators that permits experimentation for services and processes,” said Phillips, adding that it could include regulatory sandboxes, aka innovation facilitators. That regulatory structure typically involves some relaxation of regulatory requirements to allow startups or established firms to deploy new technology-based financial services for a limited time, without undergoing an extensive authorization process.