Featured Product

    FSB Report Examines Financial Stability Implications of Fintech

    February 14, 2019

    FSB published a report that assesses fintech-related market developments and their potential implications for financial stability. The report assesses the fintech landscape, including market concentration of third-party providers, and provides case studies on fintech credit and payments services. The report offers an overall conclusion on the financial stability implications of fintech developments, along with the possible actions from FSB, BCBS, and IOSCO. Additionally, the Annexes (2,3, and 4) to the report examine fintech developments in China.

    The report establishes that technological innovation holds great promise for the provision of financial services, with the potential to increase market access, the range of product offerings, and convenience, while lowering costs to clients. New entrants into the financial services space, including fintech firms and large, established technology companies (bigtech), could materially alter the universe of financial services providers. Greater competition and diversity in lending, payments, insurance, trading, and other areas of financial services can create a more efficient and resilient financial system. However, heightened competition could also put pressure on financial institutions’ profitability and this could lead to additional risk-taking among incumbents in an effort to maintain margins. Moreover, there could be new implications for financial stability from bigtech in finance and greater third-party dependencies.

    As per the FSB analysis, the following are the key findings on the link between technological innovation and market structure:

    • To date, the relationship between incumbent financial institutions and fintech firms appears to be largely complementary and cooperative.

    • The competitive impact of bigtech may be greater than that of fintech firms. Bigtech firms typically have large, established customer networks and enjoy name recognition and trust.

    • For core operations, reliance by financial institutions on third-party data service providers (for example, data provision, cloud storage and analytics, and physical connectivity) is estimated to be low at present. However, this warrants ongoing attention from authorities.

    BCBS notes that, although most supervisors have some reach over third-party providers—either directly or through contractual arrangements—the majority of supervisors indicate that they supervise third-party providers only in limited cases and have no formal structures in place to do so regularly. Particular attention is being devoted to the third-party dependencies issue, including by the BCBS and IOSCO. Going forward, the FSB Financial Innovation Network (FIN) is planning on, in cooperation with other groups, further exploring third-party dependencies in cloud services and single point of failure risks. Specifically, the FIN is seeking to better understand the market for cloud services for financial institutions (rather than for all clients), including how they manage lock-in risk and cross-border issues. Moreover, it is monitoring the activities of bigtech in finance, including cross-border activities. 

     

    Related Links

    Keywords: International, Banking, Insurance, Securities, Fintech, Financial Stability, Bigtech, Market Structure, FSB

    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7307