 Good afternoon and welcome to our public hearing here on the two guides to licensing assessments. This is part of a consultation, as you know, and we will introduce you to the main content of the two guides first here this afternoon, and then of course we are at your disposal for questions. So Sofia Toscano Rico, head of the Authorization Division, and Eric Schmitz, principal supervisor in the very same division, will first talk about the general licensing guide. And afterwards, Giacomo Caviglia, head of the Supervisory Oversight Division and Tamanate Luctea, principal supervisor in the very same division, will speak about the fintech guide, so to speak, so the licensing for fintech companies. Just to remind you, this hearing is webcast and it's live on the web, and you can watch it again afterwards on our website. So without further ado, Sofia. Thank you all. Good afternoon, everyone. Welcome from my side, also to this public hearing on licensing assessments. To give you a bit of a background, I would start with a brief presentation. You have the handouts with you. And then the main purpose of today is really to collect your questions, try to clarify any issues that are not so clear for you, so we will give time for your questions after this presentation. The main purpose of the consultation from the ECB side is really to collect feedback and input. If we can still improve this guide, we will do it, so we will take into account all your comments. And the main purpose of the guide is to harmonize, to try to increase the harmonization on the implementation of the authorization assessment criteria across the 19 SSM member states. And this, with the main aim of achieving a common supervisory practice, and increase also the transparency so that applicants know what is expected from our side when they submit an application for a licensed decision. The ECB since November 2014 has the task to ensure that all entrants to the banking market are robust and comply with national and European criteria. And this applies both to significant institutions or less significant institutions. And the ECB does this in very close cooperation with the national competent authorities. In these two guides, what we are trying to do is to provide general guidance on what the applicants for a banking license or for an extension of a license need to provide. And then in the FinTech guide, we give some specific guidance taking into account the specific business model of these types of banks. And that's why we have two guides. And Jacomo will then guide you a bit through the FinTech guide. If we move to the next slide, so slide four, what we have here is a bit of a background of the legal framework that is applicable to these procedures. You can see here the SSM regulation, which grants the competence to the ECB to decide on these type of procedures. The SSM framework regulation that goes a bit into more detail and elaborates on the specific rules of the ECB and the national competent authorities. The CRD4 that gives us the legal European background regulation that is then transposed into each member state's national law. The ECB needs always to apply national law and we all know that the CRD4 in this area is a minimum organization directive, so we do have some diversity in the way that member states transposed this area into their national law. So the ECB also needs to look at national law. We also have the EBA technical standards published recently that give us guidance on what is the information that needs to be submitted to the supervisors to start and to have a complete application form on these matters. And then the SSM policies, practices and processes come in and that's what we are trying to make more transparent through this guide and we are trying to ensure that all member states follow the same interpretation of the regulation and apply the same assessment processes. Of course, each case is a case, any assessment is done on a case-by-case basis. So what we have here is just guidance on the assessment process and what is expected. If you move to the following slide, you have the main areas of attention that we focus in any application for a licensing decision. And I would give particularly emphasis to the program of operations, including the business model, the structure, organization and the capital and liquidity just to let you know that more specific guidance will be given on these areas in terms of general licensing guidance. So another consultation process will come soon with more specific guidance on these areas. For today I would focus on the two other criteria, the suitability of management and suitability of the shareholders. We will give you also some feedback on the process as well as on the background of what can be considered in the scope for the licensing procedures. Moving to slide six in going a bit into more detail on these areas. So the guide gives specific guidance on what is considered a credit institution and we do it by going into the different terms of the definition of a credit institution. And it's important to note that when we look at an application we ensure that the application fulfills with all these components not only from a theoretical perspective but that indeed the bank will develop these activities. We also are giving now guidance on what are the situations where an ECB license is needed. And we have it whenever we have a new bank from scratch but also in some member states where we don't have a universal banking license and that the license is given for specific activities. And whenever the bank wants to perform additional activities it might require an extension of a license so the licensing process is also triggered. And then we have the case of the changes of licenses which is very specific and we only have it in some member states but that applies when we have some changes in the legal structure or in the conditions of the license. Moving forward to slide seven and focusing on the management body members now we assess the fitness and propriety of the management bodies both in their supervisory function and executive function. In this assessment we mainly follow the criteria and the guidance that is in the ECB fit and proper assessment guide that is already published. We have a proportionate approach and for example when we have a license extension where the board members were already assessed we do not assess them again. We would only focus the assessment on the additional board members that come in if any at that stage. And also the particular case of the bridge banks if the urgency to grant the license for a bridge bank so demands we can also waive the assessment of the fit and proper at that stage and do it later. In what regards shareholders we look at the reputation of the shareholders, their financial semblance and also the lack of anti-mandatory and terrorism finance that could be in any way associated. On the reputation of course the assessment is not proportionate. We go into detail when we have any kind of issues and we usually do not reassess the shareholders if they don't change in the case of an extension of license unless there are new facts that would trigger this reassessment. And I would move to the last slide of this part of the presentation where we focus a bit more on the process. So the guide gives also a bit of guidance on what is the process to be followed. One of the most relevant things for you is that the entry point continues to be the national competent authority so any application, any formal application should be submitted to the national competent authority but ECB strongly encourages that before sending the formal application there is an engagement in what we call a pre-application phase. So if there is an intention to create a new bank or to start a new line of activities you should approach both the national regulators or ECB and explain as what is your project. This pre-application phase it's important to set up also the expectations to try to have an understanding on what could be the timeline, what will be the elements that are required to ensure that you submit a complete and well granted application that then ensures also a faster assessment process. Because what we see and we will talk about that on what is the expected time for a decision, what we see that impacts the most on the assessing time is indeed the completeness and the adequateness of the information that is provided from the applicants. The average assessment time for licensing would go from 6 to 12 months or 12 months is usually the maximum time that the assessment could take but of course this can vary according to national law and we would need to follow the timeline that is provided in national law. And just very briefly in the end the decision could be either a positive or negative or decision with conditions or obligations and we will always ensure a do and fair process giving also always feedback to the applicants on how the assessment process is ongoing. I would give the floor then to Ciacomo to guide us through the Fintech guide. Thank you Sofia. Fintech guide, let me start giving you some background on the rationale behind the decision by the ECB to prepare a specific Fintech guide regarding the assessment of licensing applications. Now they needed to have a common supervisory approach for the assessment of these institutions comes from the recent observation of an increasing trend in applications from Fintech banks. The underlying objective of this initiative is to promote innovation and efficiency in the banking industry while at the same time contributing to the safety and soundness of the banking system in the context of rapid technological change. So Fintech institutions with their own risk profile need to be properly authorized as any other bank. And equally they are requested to put in place risk control frameworks that can anticipate and understand a response to the risk arising in the field of operations. The Fintech guide fosters then a common approach for the assessment of these institutions including also their own risk profile from the start of the application process. With the publication of the Fintech guide and the public consultation of course, the ECB provides transparency of the requirements to applicants and also of course increase also their understanding of the procedure and criteria applied during the process. So we can say therefore that the transparency is intended in this case also to facilitate to the extent possible the application process. Now moving to slide 10, what do we mean by Fintech? For the purpose of this guide, the ECB has made use of a pragmatic definition of Fintech. Also based on a concept already elaborated by the financial stability board. So Fintech is indeed defined by the ECB as a business model in which the production and delivery of banking products and services are based on technological enable innovation. This broad concept is able to capture actually the different activities, the wide range of activities conducted by the credit institutions in the different countries of the Euro area and also allows to let's say to capture both existing banks that evolve and integrate the technological innovation but also Fintech banks that are new market participants. Let me say that what is the word highlighting here mentioning is that the policies including the Fintech guide are not exclusively applicable to Fintech institutions and may equally be relevant to the assessment or considered to be relevant for the assessment of banks with more traditional business models. On slide 11, let me say that the supervisory consideration included in the Fintech guide should be read in conjunction and in accordance with the ECB general licensing policies and methodology. So the guide on Fintech does not change at all the general policy. On the contrary, it aims at complementing the general policy, providing further indications related to the specificities of these institutions to the supervisory authorities. And that's also the reason why the structure of the Fintech guide reflects the same structure and the same supervisory areas assessed as part of any new license application. Now going through the slide 12, going through the specific areas of attention in the Fintech licensing process, let me briefly mention in the era of governance the suitability of the members of the management body of Fintech institutions. Given the specific nature of these institutions and the material technology support needed to support their activity, of course the members of the management body of these institutions should have a quite deep knowledge and technical expertise and experience in technology. Of course this is needed in order to understand the risks that are in the business model of these institutions. However, what I can say is that a common feature that we often observe in Fintech applications is that there is mostly focus on these technological aspects and less attention on the banking and financial knowledge. Therefore there is a need that during the licensing process to spend a lot of attention by the supervisory authorities also about the fact that the banking and financial experience is reflected in the composition of the management body of these institutions. Now turning to the next slide to the area of structural organization, let me highlight the importance of having in place a proper credit risk approval and governance. Indeed this is a quite important aspect in the initial phase of the business of these institutions. Fintech banks, there is a tendency of these institutions to use outsourced credit scoring services or rely on alternative sources of data or sometimes making use also of alternative credit scoring methods. This is related to the fact that the particular in the initial phase of their activity these institutions are not able to collect all the information related to the capability, to the repayment capability of their customers. Therefore also in this case there is a need from the supervisory authority to spend a lot of attention on specific aspects, for instance on the minimum data requirements, on the feasibility of in-house credit scoring models or the presence of commensurate risk management and capital safeguards in case there is a use of alternative data and credit scoring methods by the financial, by the Fintech institutions. Still in the context of the structural organization, the assessment of the information technology related risk is of course extremely important and the ECB as you know has always spent particular attention to the cyber risk but in this case we also refer to other related risk like outsourcing or cloud outsourcing. Also in this case there is a need from the supervisory authority to spend attention on aspects like for instance the possibility to have access or contractual rights to audit or supervise for instance outsources, outsource activities. Now moving to the last slide concerning the Fintech guide, let me briefly touch upon the supervisory considerations in the area of the program of operations, sometimes referred to as a business plan. By saying that compared with the traditional banks, the business projections and the resulting capital requirements of Fintech institutions tend to have a greater level of uncertainty. And this relates to the fact that there is the application by this bank of new technology and actually the implementation of the same business plan is surrounded by general uncertainty. So in this context the ECB and the national comparatories will assess whether the applicants can demonstrate that they are able to hold and reserve sufficient capital to cover start-up losses in the first three years of activities. In this context there is also a possibility envisaged by the Fintech guide, the national comparatories can ask the Fintech to prepare an exit plan, identifying how to unwind the voluntary, the business and close down the bank without imposing additional losses to the possible. So I think that I can finish the concluding here with the overview of the Fintech guide. I turn back to my colleague Sofia for the timeline of the current process. Thank you. Giacomo. So in the slide 15 you have a brief description of the consultation process. Today we are having the public hearing and as you know comments can be sent and submitted until the 2nd of November when the public consultation will end and we expect to be able to publish the final guide close to the end of the year by the 20th of December. You have in your documents the link to the information on the consultation process so if you need more information please feel free to go there and we are looking forward to receiving your written comments because we take them of course into account when drafting the final guides and this is it. We will open now for questions. Thanks Sofia. So we are now at your disposal for questions so if you have any please raise your hands. We have microphones in the room so that you can speak to everybody. Thank you. Just one question perhaps at the beginning. You said as well the pre-application phase you expect the applicant to talk to the NCA and to the ECB. In my experience the NCA is more the first entry point and the touch point so how to interpret this should an applicant get contact to you as well directly or what do you expect? In all processes and our experience shows that we work very closely together with the national competent authorities so it's on your discretion to approach either institution because in the end we will work together anyway. What we usually do is even if in the first exploratory meeting the ECB is not present or the NCA we will ensure that all information is shared and we will also ensure that if needed both entities are in those meetings and will of course already look into any documentation that comes in in this pre-application phase. So cooperation is one of our key principles and we ensure that it runs smoothly. The follow-up then so within the application process in my experience was partly so that more the NCA was driving the whole process and then with the draft proposal ECB coming into the play a bit afterwards for the final decision making so how it is in future do you want to be more involved right from the beginning to make it more even more smoother? To make it a bit more clear whenever there is a formal application that is submitted to the NCA they are always the entry point the ECB is also informed that there is an application submitted at that moment in time there is an exchange usually with the NCA's and then of course it depends also on the specific case if the ECB feels the need to immediately start assessing at the same time and discussing already with the NCA's or we could consider that the NCA's could start the assessment process and we would then ensure that there are some there is some alignment before as you know in the licensing cases which is quite exceptional in the in the SSM context if the NCA considers that the EU or national requirements are not met they can reject the application by themselves so they don't need to submit a proposal to the ECB to reject they can they can immediately reject so if from the first assessment that is conducted it is clear for the NCA that the requirements are not and will not be met they can take that decision immediately and our experience up to now is that the interaction is very very good with the with with all the NCA's and the assessment process goes very smoothly we have regular interactions we know NCA's on the processes that are ongoing so if you have contacts with the NCA's you should continue those those contacts and internally we will align when the ECB needs to be involved and how the other way around would also work if we are contacted we will ensure that the NCA is always informed and involved but in these cases as they are the entry point it could make sense that the first approach is is the NCA. Thank you Daviesa and Chia from Banco Santander. First of all thank you for the presentation and thank you for the guides and thank you for making it in a public procedure where we can give you our comments and I only have one question about if if our already regulated bank by a vintage company let's say 51% of a vintage company to develop kind of activity that the bank already have a license that point triggered the need of applying for a new application process for that I mean it's an activity that we already do but now we buy a new company to develop a little bit this business activity so the need for there is a trigger for a new application process for that maybe I can start and then Jacome if you want to complement if this entity is not a bank so if the FinTech company is not a bank and will develop banking activities that encompasses the definition of a credit institution then yes this entity would need a new banking license even if it's a subsidiary if it would become a subsidiary of a bank that already has of course the banking license to pursue those activities so if it's a new entity an entity that does not have a banking license and they will start developing new activities that are considered banking activities then they would require a new banking license just to complement what Sophia said I mean there are different business models applied in the context of FinTech so of course there might be situations where there are already there are banks already in place there are fully fledged virtual banks so there are several situations I mean the one that you mentioned doesn't trigger of course any any licensing procedures unless you are going to buy a different subsidiary or entity which is defined as a bank so then in this case of course a district qualifying multi-procedure I mean that it doesn't make any difference the fact that it's a bank or is any other player who buy this FinTech company so the process will be exactly the same I mean the new entry will have to apply the whole process application process so it doesn't mean it doesn't make any difference that the the parent company is a bank who already have that license for that activity yes if it's a different entity so the licensing is per entity if it's a new entity that will start because if it was already a FinTech company maybe what they do is not what the banking activity so they do not grant receive deposits or the repayable funds that they don't grant credit on their own account but if they start doing these activities so if they start conducting banking activities they would require a banking license when you say is the process the same the process might not be the same if the acquire is a bank or not because as I was mentioning if the shareholder is already a shareholder that is known to the supervisors the assessment is probably faster and easier because we would already have all the information on our side but the licensing triggering a licensing process yes it would trigger even if it's a bank buying one of these entities that will become a bank any other question thank you my name is Jochen Kinderman from Simmons and Simmons when we read the definition for FinTech banks we struggled a bit with the with the comment that just relates to the question on technology enabled innovation I mean currently any kind of bank with which we work in a certain way develop structures acquire structures which are very close and I would call it qualifiers technology technology developing so in a nutshell for us this guide meant in a certain way that any kind of bank application also has to cover the particularities of this new guideline is that also your understanding or where do you draw the line between sort of a normal bank and FinTech bank thank you for this question again let me say that there is no intention whatsoever to introduce new requirements with the FinTech guide so there is only one general policy concerning the licensing in the assessment of the licensing application that said that what the FinTech guide they just complement the general policy so indeed if there are banks that have specialized entities or units in their own context of framework and the potential banks that they're going to apply to receive a license in the context of the assessment of the of the license for these banks some of the aspects that I just described before will be applied during the assessment of everybody supervisor authorities so this is I mean what we want to to do with this FinTech guide is to let's say to identify this special area of interest from a supervisor perspective this particular attention when there is a high level of technology let's say expressing the structure of the bank so in this case of course there is an attention to specific aspects but otherwise the process is exactly the same the assessment is exactly the same so if you want to complement that is a bit of a concept of the FinTech guide can you then probably also comment on the question what happens if a bank like I would say currently very common acquires in this case a tech firm then you would probably come to the conclusion this now changes to FinTech bank and that this kind of jump over a threshold does this mean this is an expansion extension of the licensing so does this mean I have to go through an additional process or is this already included so what what's the process under these circumstances thank you for the question this is certain doesn't trigger a new license procedure per se unless unless the bank was not supposed to have a fully fledged license at the beginning and these in this case I mean if there is an extension of activities and this activity was not originally foreseen in the banking license provided by the supervisory tourists then there is a need to have an additional request for licensing procedure when extension of license we have to rely a lot on also in the national frameworks in some jurisdictions there is no possibility to have there is no possibility to have let's say licensee that refer only to part of the activities there are fully fledged licensee provided to banks in other jurisdictions on the contrary there is a possibility to have limited license in terms of activities and if we are referring to these jurisdictions indeed and we're referring to the case that you mentioned to before then indeed this would trigger the need that we have to request an extension of the activity with a new process for the licensing assessment in this case the FinTech a guide would apply at least the aspects related to FinTech guide that would be considered by the supervisor authorities during the the process any further questions it seems as if the presentation was so complete that only very few questions that's great yeah thank you very much then thanks for coming and we're looking forward to receiving your comments and writing if you if you have any if you if you have already sent some some questions and comments and requests for clarifications in and yeah looking forward to this and thank you very much again for coming