Baku, Azerbaijan, June 9
By Azad Hasanli - Trend:
In 2018, the financial sector of Azerbaijan began to recover after a few difficult years - banking, stock and insurance markets returned to active development.
Thus, the insurance market grew 55 percent over the year, the stock market grew three times. The hardest-hit banking sector is also showing some growth - lending in the country has increased by 0.5 percent since the beginning of the year.
To stimulate growth and minimize the negative effects of various risks, the financial sector needs more flexible mechanisms that would help adapt more quickly to new realities. One such mechanism is the "regulatory sandbox" which is already being successfully implemented in some countries.
What is regulatory sandbox? This is a special legal regime that allows legal entities engaged in the development of new financial products and services to carry out experiments in a limited environment for its implementation without the risk of violation of current legislation.
Commenting for Trend on the benefits of sandboxes for the financial sector, Pavel Shust, executive director of the Russian Electronic Money Association, noted that the regulatory sandboxes allow financial organizations to test new products and services in a limited area of the market, and allow regulators see if there are any risks and how they can be minimized without endangering the entire market.
"The regulatory sandbox is a fairly new tool in the arsenal of regulators, but about 20 countries have implemented it or are preparing to implement it in one form or another. The fact is that there are more and more innovations in the financial market - there are new payment instruments, new ways of interaction with the clients and so on. New technologies allow increasing the efficiency of the market, increasing the availability of financial services and making the economy more competitive. So, consumers, regulators, and financial institutions are interested in modernization," Shust said.
However, he continued, there are two problems associated with the introduction of modern technologies in the financial sector.
"Firstly, financial legislation often does not regulate any specific new technologies, because when it was adopted, they simply did not exist. And without a regulatory framework, financial institutions cannot bring new products to market. Secondly, not all risks of new technologies are sufficiently studied. And, of course, this raises concerns of regulators. As a result, new solutions appear in the market more slowly than we would like, or do not appear at all. And these difficulties are relevant for almost all countries, regardless of geography or type of economy," said Shust.
"It is in such cases that regulatory sandboxes are needed."
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