The Arab Monetary Fund publishes a document on "Open Banking Regulatory Principles" in the Framework of the Arab Regional Fintech Working Group

 The document sheds light on the opportunities that open banking services offers to the financial and banking institutions customers

  
  • The regulatory requirements to initiate open banking services in the Arab countries
  • The importance of creating a stimulating environment to encourage innovation in open banking
  • The need to protect users of open banking and finance services and the environmental and social responsibilities within the framework of these services

The Arab Monetary Fund (AMF), in collaboration with the Arab Regional Fintech Working Group members, published today a document titled “Open Banking Regulatory Principles”, as part of the AMF ongoing efforts to support digital financial transformation in the Arab countries, which plays a major role in growing the level of financial inclusion and contributing to the development of innovative financial services. The document highlights the benefits that open banking services may create for the financial and banking institutions customers, in terms of increased competition, lower costs, encouragement of innovation, and the generation of new business models and use cases.

The document, which was prepared by members of the Arab Regional Fintech Working, portrays a set of regulatory principles that enables the development of a solid and modern framework for regulating open banking services, in addition to providing information on open banking services systems in a number of markets. The document aims as well to assist Arab central banks and supervisory authorities to coop with international best practices in terms of open finance and open banking operations and support the initiation and growth of these services in the Arab countries while mitigating the various associated risks.

The document introduces a set of regulatory principles, namely nine principles, covering the importance of enabling use cases prior to full-fledged launch of the open banking regulations, the need for planning for a regulatory mechanism that encourages regulated entities to take-up within set timelines. Also, enable permission-based access technologies prior to widespread adoption of Open API infrastructure in order to avoid delay innovation, and to drive the early adoption of industry standards on regulated entities and certification of Account Information Service Providers/ Payment Initiation Service Providers (PISP/AISPs). 

The principles also promote ensuring the adoption of robust data governance and protection frameworks by service providers and third parties, as well as requiring consumer protection and liability frameworks to be adopted across Open Banking ecosystems. Moreover, they recommended a phased approach in order to properly achieve the anticipated national strategic objectives and use cases and highlighted the different aspects of scope expansion and supervising non-bank service providers.

Within the same context, the document recommends the Arab supervisory authorities to take into account the importance of enabling innovation and activating use cases to allow consistent development of legislations, when designing frameworks for open banking operations, and encouraging early collaboration with service providers, to set the proper specifications and standards. This is along with a contingency plan for implementation delays including the availability of API infrastructure components, as well as ensuring robust protection for consumers of financial and banking services.

It worth mentioning that the document included number of Arab central banks’ experiences in developing open banking operations, foremostly the pioneering experience of the Central Bank of Bahrain, which launched its own open banking operations framework back in 2018. It also addresses the launch of a comprehensive framework for open banking operations by the Saudi Central Bank, and the efforts of the Central Bank of the United Arab Emirates.

On this occasion, His Excellency Dr. Abdulrahman Al Hamidy, Director General Chairman of the Board of Directors of the Arab Monetary Fund, praised the ongoing efforts of the Arab Regional Fintech Working Group in issuing guidelines aiming at contributing to the development of the Fintech industry in the Arab countries, pointing out the importance of this regulatory  document in serving as a guide to create an environment that stimulates the growth of these operations, supporting the financial inclusion and digital financial transformation in Arab countries, and creating additional opportunities for   sustainable development.

You can download the report by clicking on the following link: https://www.amf.org.ae/en/publications/open-banking-regulatory-principles 

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