Policy paper

Joint statement by HM Treasury, the CMA, the FCA and the PSR on the future of Open Banking

Published 25 March 2022

March 2022

Open Banking has led to greater competition and innovation in UK retail banking. It has brought real benefits by allowing consumers and businesses to share their data with trusted third parties who can help them manage their money more easily. Open Banking also lets consumers and businesses make payments directly from their accounts, providing a secure and cost-effective alternative to using card networks. It helps users make better-informed decisions and make the most of their finances with individual financial management dashboards. It also improves users’ access to credit, including for consumers in vulnerable circumstances. It has been a UK success story, with significant take-up and ever-accelerating growth. Many other countries have looked to the UK’s approach as they develop their own models.

The Government and regulators are committed to maintaining the UK’s leadership in the field and sustaining this momentum. We want to build on the initial success of UK Open Banking to help unlock and realise further benefits for consumers, businesses and the wider economy. Open Banking should continue to support innovation and greater competition for consumers and businesses. Critical to this will be establishing an appropriate successor to the Open Banking Implementation Entity (OBIE), which has played a central role in developing the UK’s Open Banking ecosystem. It is important that its successor is overseen effectively, as the Competition and Markets Authority (CMA) has done since 2017.

Cross-authority work

The CMA’s response to its consultation on the future oversight of the CMA’s Open Banking Remedies explained that the implementation phase of the CMA’s Open Banking Remedies is expected to come to an end later in 2022. There will be a staged transition in the governance of Open Banking, summarised as follows:

• Current state: The OBIE, overseen by the CMA, continues to implement the specific areas covered in the Open Banking remedy implementation timetable (the Roadmap) in line with the CMA’s Retail Banking Market Investigation Order 2017 (the CMA Order). This will end when the CMA agrees the Roadmap is completed and is satisfied that there are adequate arrangements in place for the transition of OBIE’s functions to a suitable successor body.

• Interim state: The OBIE’S successor (the future entity) will take on responsibility for further developing Open Banking. The implementation phase of the CMA Order will end and the banks which are subject to the CMA Order will have remaining ongoing responsibilities. This interim period will end when the long-term regulatory framework is in place.

• Future state: A long-term regulatory framework will be put in place for Open Banking and the future entity will continue to develop Open Banking within this framework.

This joint statement sets out the cross-authority work that HM Treasury, the CMA, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) plan to undertake to complete this transition. Alongside this, HM Treasury, the CMA, the FCA and the PSR are working together to provide a vision and propose a constitution for the future entity, ensure a smooth transition from the OBIE, and oversee the new entity once it is set up. In particular, we expect it to:

• Maintain and further develop the existing standards and framework.
• Play a central role in delivering new proposals beyond those required by existing regulations, overseen by a Joint Regulatory Oversight Committee (see below), to further support innovation and competition.
• Be independent, well-governed and underpinned by a set of values and cultures that include an emphasis on integrity and promoting ethical behaviours, as highlighted by the CMA in its response.
• Fairly and effectively take account of the interests of relevant industry and end-user stakeholders, including consumers and businesses.
• Ensure it has sufficient resources to carry out its functions effectively.
• Be able to respond and adapt to new developments as Open Banking evolves and help in developing future initiatives, including Open Finance.

Joint regulatory oversight committee

This cross-authority work will be taken forward by a new regulatory oversight committee (the Committee) led jointly by the FCA and PSR, with HM Treasury and the CMA as the other members. The FCA authorises, regulates and supervises Open Banking and payment firms, including through its role as competent authority for the 2017 Payment Services Regulations. The PSR is the economic regulator for payment systems. The CMA will be responsible for the residual Open Banking obligations under the CMA Order. The Committee will engage closely with industry and representatives throughout.

HM Treasury is also working with the FCA and PSR on proposals for a permanent future regulatory framework for Open Banking, based on joint regulatory oversight by the FCA and PSR and backed by any necessary legislation. The Committee will be responsible for:

• Making recommendations for the design of the future entity and considering any necessary interim governance and funding arrangements with industry and other stakeholders. As set out in the CMA’s response to its consultation, a more broad-based funding model is necessary, reflecting the activities of the future entity. The task of designing, consulting on, and implementing a long-term funding model should be a top priority for the future entity’s Board.
• Advising the CMA on the transition from the OBIE to the future entity, and overseeing the transition to the future entity where provided for under any interim arrangements.
• Considering the vision and strategic roadmap for further developing Open Banking beyond the scope of the CMA Order, working with industry and other stakeholders. This will include unlocking the potential of Open Banking payments, enabling end users to share data, managing access, and developing further data sharing propositions, including greater consumer protection.
• Providing appropriate input on the permanent future framework for Open Banking.
• Overseeing and advising the future entity once established on an interim basis until the formal regulatory framework is in place.
• Ultimately guiding the transition from the interim arrangements to the permanent future framework.

The Committee aims to:

1. Convene the first meeting in Q2 2022
2. Have drawn up a plan for the design of the future entity by Q4 2022
3. Have established priorities with relevant stakeholders by Q4 2022

Working with stakeholders

We look forward to working closely with the industry and other key stakeholders to build on the success of Open Banking so far and secure further benefits for consumers, businesses, and the UK economy.

We will engage, through the Committee, with stakeholders including industry participants and end- user representatives to help in setting the strategic direction and delivering on these objectives. We will set out more detail on this in Q2 2022.

Background /Notes

1. The Open Banking remedy is governed by the Competition and Markets Authority’s Retail Banking Market Investigation Order 2017 (PDF, 685KB) (the Order). The actions set out in the Roadmap for the Implementation of Open Banking (PDF, 389KB), have now nearly all been implemented by the banking industry. A number of requirements under the Order will continue following the Roadmap’s implementation. These largely involve maintaining the standards, making them widely available and monitoring compliance. The CMA will be responsible for overseeing these requirements.

2. In anticipation of the conclusion of the implementation phase of Open Banking later this year, in March 2021 the CMA undertook a consultation on the future oversight of the CMA’s open banking remedies. The response to the consultation was published alongside this statement.

3. Alongside the CMA’s work to analyse responses to the consultation, HM Treasury, the CMA, the Financial Conduct Authority (FCA) and the Payments Systems Regulator (PSR) have worked together to consider arrangements for the future regulatory oversight of Open Banking.