Central Bank of Ireland commences consultation process ahead of launch of Regulatory Sandbox

The Innovation Hub

In 2018, the Central Bank of Ireland (the “CBI”) launched its Innovation Hub in the hope of better engaging with innovators and innovation facilitators in the Irish financial services sector. The intention behind the establishment of the Innovation Hub was two-fold. On the one hand, the CBI wished to give fintechs and innovators in the market the opportunity to directly engage with the CBI. On the other, the Innovation Hub gave the CBI a direct view into the world of financial services innovation which they may not otherwise have accessed.

This enhanced engagement would in turn benefit the Irish economy and its consumer base. Central to the CBI’s regulatory mandate is consumer protection and ensuring that the needs and interests of Irish consumers are sufficiently met. By actively monitoring progress in  financial innovation, the CBI would be better placed to engage with market stakeholders and encourage innovation in the financial services sector.

The CBI has set out details on the progress of the Innovation Hub and key feedback received from stakeholders in its ‘Consultation Paper 156 - Central Bank approach to innovation engagement in financial services’ (the “Consultation Paper”) available here.

Since its launch, the CBI reports 375 engagements with innovators via the Innovation Hub and publishes a report on feedback received via these engagements on an annual basis. The CBI has reported that a large number of the inquiries received by the Innovation Hub come from start-ups seeking guidance on how regulation applies to their proposed business models.

Stakeholders have flagged to the CBI that improvements to the structure of the Innovation Hub would be welcomed, as well as improved clarity on regulatory expectations regarding new technologies. Further, stakeholders are eager to see the introduction of a regulatory sandbox, as seen in some of our neighbouring EU Member States.

The CBI has confirmed in its Consultation Paper that it will make enhancements to the Innovation Hub including:

• Enhancing outreach and engagements with stakeholders by conducting regionally focussed roundtables and annual themed workshops;
• Participating in relevant Irish, EU or international programmes and forums;
• Participating in innovation activities such as hackathons and market-led skill programmes to further develop skills within the CBI; and
• Launching a Digital Centre for knowledge sharing of dedicated content with relevant stakeholders.

Proposed Regulatory Sandbox

In response to the feedback received via the Innovation Hub, the CBI has announced that it intends to establish its Innovation Sandbox Programme in 2024 (the “Regulatory Sandbox”) There are currently 15 regulatory sandboxes established across 13 EEA countries as well as the UK’s Financial Conduct Authority having a Regulatory Sandbox in place since 2016.

Some of the key objectives of the CBI’s Regulatory Sandbox are to:

• provide regulatory insight to participants;
• encourage innovation in the financial services sector;
• increase CBI knowledge into the sectoral developments and risks; and
• assist firms in identifying consumer protection safeguards.

The Consultation Paper sets out the proposed operating model for the Regulatory Sandbox. The key stages involved in the Regulatory Sandbox are as follows:

• Stage 1: Thematic Approach

Stage 1 involves the identification of key themes by an evaluation panel comprised of relevant CBI staff and management.

• Stage 2: Call for Proposals

Calls for proposals will be made annually to attract third party operators willing to partner with the CBI and provide relevant expertise and resources to facilitate programmes.

• Stage 3: Call for Applicants

The CBI will open the application period for a limited period of time. Applications will be assessed by senior CBI management.

• Stage 4: Innovation Sandbox Programme

Successful applicants will be granted access to the relevant programme through which they will be able to access developmental supports including in-depth regulatory case studies, dedicated workshops and access to sector expertise.

• Stage 5: Off boarding/Exit from programme

Upon completion of the programme, the participant should have a clear understanding of the necessary steps required to further engage with the CBI.

Next steps

The Hogan Lovells Dublin team is available to assist you in participating in the Regulatory Sandbox commencing in 2024. The Hogan Lovells London team is experienced in bringing clients through the FCA’s Regulatory Sandbox process and is available to provide additional support.

If you would like to discuss any of the above developments with us, please get in touch with Eimear O’Brien, Eoin O’Connor, Bill Laffan, Hannah Vero or your usual Hogan Lovells contact.

Authored by Eimear O’Brien and Hannah Vero.