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The Framework for Financial Data Access (FiDA) regulation, intended to extend provisions in open banking to a wider financial services context, has been tipped to be withdrawn by the European Commission.
Documents seen by Vixio suggest that the commission feels the proposals go against its current goals of simplifying EU regulation, warning that significant burdens could be sparked.
The regulation has proven divisive for both fintechs and incumbent financial institutions
According to the documents, the commission has carefully examined which proposals it feels should be withdrawn, and will now consult with the European Council and European Parliament.
The problem with FiDA
It is not entirely surprising that FiDA could be dropped by the regulator, although sources suggest that it has still come as a shock, with no signs coming from the commission’s financial services arm in the run-up to it.
Sources have suggested that the regulatory proposal may not be ditched entirely. For example, it may be recalibrated to make it less burdensome.
Commenting on the development, one lobbyist speaking off the record told Vixio that withdrawing or amending FiDA is “a good decision, given it was not fit for purpose”.
However, they added that dropping the regulation “does put the EU at a disadvantage in progressing with open finance”.
One source previously told Vixio that it is “really badly written”, while another said “the commission had washed their hands of it”.
In addition, a lobbyist in the payments space once told Vixio they had “made a dog's dinner of it”, suggesting that they “should start again”.
Issues with the proposed regulation have included its wide scope, colloquially described as “the Brussels’ creep” and the vagueness surrounding schemes that would need to be set up for FiDA.
It is thought that the language of the proposal could have led to multiple schemes throughout the EU with different rules attached.
For example, it might have meant Polish pension investors setting up a scheme that was separate to others elsewhere in the trading bloc, which would have done little to encourage any remnants of a single market.
Public support
Despite the rumours, the commission appears to still be advocating for the regulation publicly.
For example, Maria Luís Albuquerque, the European commissioner for financial services and the savings and investments union, spoke highly of the regulation at a conference in Brussels last week (February 4).
“The ‘FiDA' proposal will put users in full control,” the politician said during a speech at the 9th Annual Fintech and Regulation Conference.
“We need to be ambitious and aim for a swift agreement on FiDA with the Council and Parliament. We already have a strong starting position, with alignment on key aspects including scope and schemes, which are crucial building blocks to make it a success,” she said.
“We expect to see even greater innovation through open finance.”
What happens next?
It is thought that the EU’s position will become official today (February 11) and Parliament and Council will no doubt have something to say, especially the European Parliament’s Economic and Monetary Affairs (ECON) Committee, which has already established a position on FiDA.
The commission has the exclusive right to initiate legislation within the EU, which also includes the authority to withdraw its proposals under specific circumstances.
This power allows the commission to guarantee that enacted laws align with their original objectives and remain relevant.
The commission may decide to withdraw a proposal if it becomes obsolete due to changes in the political, economic or legal environment, and can use it to prevent the adoption of ineffective legislation.
In addition, if the European Parliament and the Council propose amendments that significantly alter the essence of a proposal, or that hinder the achievement of its initial goals, the commission is entitled to withdraw it.
Historically, the commission has exercised its withdrawal power sparingly, which is unsurprising considering the concerns that linger in the EU about a potential lack of democratic scrutiny.
Notably, in 2015, it withdrew a proposal concerning macro-financial assistance to third countries after the Council and the Parliament proposed amendments that, in the commission's view, distorted the original objectives.
The Court of Justice of the European Union upheld this withdrawal, emphasising the commission's right to maintain the integrity of its proposals.
When the commission withdraws a proposal, the legislative process for that specific initiative ceases.
However, this does not preclude future action on the same issue and, as suggested, FiDA could return in a new legislative act.
The commission may, for example, undertake further consultations, impact assessments and/or revisions to address the concerns that led to the withdrawal.
It can subsequently introduce a new or modified proposal that better reflects the current context and garners broader support among EU institutions that means amendments made will not upset the entire process.
