By Moriah Costa on 21st September 2017
The European Central Bank is considering requiring banks involved in financial technology to hold more capital buffers.
For banks wanting to get involved in the growing fintech sector, it could come at a price.
The European Central Bank is considering asking them to hold more liquidity and capital buffers, according to draft licensing guidelines published on Thursday.
Banks in the fintech sector will need more liquidity because of their volatile client base and more capital as a result of entering untested products, the bank regulator said.
“The start-up phase of a fintech bank could pose a greater risk of financial losses which may progressively reduce the amount of own funds available,” the guidelines said.
The European Central Bank may also has fintech banks to demonstrate IT compliance and could ask shareholders to fund the company for at least three years.
However most fintech firms will not need a banking license to operate as they are small and do not use money gained through deposits, the regulator added.
This could be an advantage for smaller fintech firms competing with the High Street banks.
The central bank will collect feedback on the guidelines until 2 November and will hold a hold a public hearing on 26 October in Frankfurt.