Financial regulation – How to promote safe and secure financial innovations A sound legal framework is important for private service providers to develop secure and efficient payment services and for authorities to keep the confidence of users in the regular functioning of the payment system. The development of payment services is a continuously evolving dynamic process, driven by technological advances. Market players design new services that better adapt to users’ needs in order to expand their business. In doing so, they try to balance the new opportunities the market opens up with the financial regulation they have to comply with. However, private players want to maximize their profits and may not have the right incentives to reach a socially viable equilibrium. In this sense the regulator monitors the development of the market and technological advances to be able: to foster innovation (and better customer experience); strike the right balance between security and efficiency; adapt the regulation to new services; put in place effective consumer protection measures; ensure fair competition among market players; avoid regulatory arbitrage. The new regulatory framework in Macedonia which is in an advanced stage of drafting, aims at balancing safety and creativity. In order to protect consumers and maintain financial stability, the new framework envisages licensing regime for the non-banking payment service providers as well as an appropriate safeguarding measures for client’s funds. However, it supports the grow of start-ups in the Fintech sector by easing some of the regulatory requirements related to the initial capital, BCP, external audit etc.

Another aspect of EMU governance is strengthening the economic part of EMU. This requires structural reforms aimed at enhancing potential growth, reducing structural unemployment and increasing national economies’ resistance to shocks. While many euro area countries undertook a wave of reforms during the crisis, today, across much of the area reforms have stalled. This is not a uniform picture. Malta is enjoying robust economic growth despite regional headwinds, largely as a result of reforms implemented in recent years that stimulated the development of new areas of economic activity and increased labour participation. Malta has also taken full advantage of its membership of the EU and its adoption of the single currency. Resilience to shocks can also be built up through deeper economic integration. Indeed, as the Five Presidents’ report argues, financial integration helps to share risk across EMU member countries. The completion of a Banking Union, which will strengthen the European banking sector, is a key objective in this regard. In this area, success so far has been partial. The Single Supervisory Mechanism involving the ECB via the Supervisory Board and the national supervisory authorities is up and running, following a comprehensive health check of the euro area banks. The Single Resolution Mechanism is also operational and is being funded according to plan. As regards the third pillar of Banking Union, the European Deposit Insurance Scheme (EDIS), negotiations are still under way. We believe that EDIS is will increase confidence in banks across the euro area.