UK to Boost Open Banking With New Regulator

The U.K. Treasury, the Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA) and the Payment System Regulator (PSR), issued a joint statement Friday (March 25) highlighting the benefits of open banking and their plan to create a new regulator that continues supporting these efforts.

Since 2017, when the CMA concluded a market study on the competitive conditions in retail banking, the phenomenon of open banking started in the U.K. The CMA ordered the largest nine U.K. banks to share accountholders’ data with third parties and for an independent Open Banking Implementation Entity (OBIE). This entity has played a central role in developing the U.K.’s open banking ecosystem, but it will now be replaced by a new regulator with more powers to continue not only with open banking, but also with future initiatives like open finance.

“The CMA has carefully considered the appropriate future arrangements to boost open banking so that its significant benefits can be realized even more widely,” said CMA CEO Andreas Coscelli in a press release. “We have today outlined the core principles that will ensure the new entity successfully picks up the reins.”

The Treasury, the FCA, the CMA and the PSR will take part in the design of the new regulator and in the transition process from the OBIE to the new entity. They will form a joint regulatory oversight committee, but the main responsibilities may fall under the FCA as it regulates and supervises open banking and payment firms, and the PSR as it is the economic regulator for payment systems.

The statement seems to suggest that the CMA may still be responsible for residual open banking obligations under the CMA order, but it may not have a prominent role in the future oversight of open banking or the new entity.

The new entity should also be independent and well-funded, and it will likely be given more powers to develop the existing standards and frameworks. This includes, according to the statement “delivering new proposals beyond those required by existing regulations.”

The statement doesn’t specify if the new open banking regulator will be an entirely new entity, or if an existing one could take these new attributions. If the government considers the latter, the first obvious candidate could be the PSR, as it is the specialized authority on payment systems and one of its priorities is to promote open banking solutions.

In an interview with PYMNTS, PSR Senior Policy Manager Andrew Self said the PSR was working with other regulators and the government to identify the appropriate regulatory framework. Yet, as the PSR also sits in the joint oversight committee, it seems unlikely that it will take a dual role.

Read more: UK Payment Regulator Says Card Payments, Open Banking, Big Tech on 2022 Agenda

But the other entity that may qualify for this role is Pay.UK. This is the U.K.’s leading retail payments authority. It controls the main payment systems in the U.K., and it is developing the New Payment Architecture (NPA) that will enable financial institutions (FIs) and third parties to provide instant payments.

Pay.UK is supervised by the PSR, and it will play an important role in developing open banking and open finance. Self told PYMNTS that the PSR is “keen to explore the viability of opening up access to data in the NPA and will work with Pay.UK on this.”

Thus, Pay.UK acquiring these new attributions would be in line with its other obligations. Besides, it may have the complete picture of the payment systems in the U.K. to provide a level playing field.