General Information & Client Services
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
June 20, 2018

BIS published panel remarks by Luiz Awazu Pereira da Silva, the Deputy General Manager (DGM) of BIS, at the CV Meeting of Central Bank Governors of CEMLA, on June 05, 2018, in Paraguay. He examined the benefits and risks of financial technology for emerging market economies. Risks examined include financial risks (such as liquidity and credit risks), cyber risk, and data privacy risks.

Mr. Silva reviewed the fintech developments relevant for emerging markets, with focus on distributed ledger technology (DLT) and mobile and internet; he also touched on machine learning and big data. While examining some recent applications to mobile banking and payments, peer-to-peer lending, remittances, trade finance, and credit extension, he highlighted the potential of these innovations as new forms of financial inclusion and financing channels. He added that commercial banks and central banks (such as HKMA, RBI, and MAS) have collaborated with startup companies to explore an application of DLT to trade finance. One transaction conducted in late 2016 showed that DLT could cut processing time from 20 days to only a few hours relative to a paper-based system. Other banks are also reported to have tested similar DLT-based trade finance systems successfully. However, commercial viability hinges on widespread adoption and cross-border interoperability. Finally, after discussing their potential implications for monetary and macro-prudential policies, he concluded by examining the options for a regulatory response.

The DGM of BIS highlighted that many of the emerging market economies have a relatively less developed financial sector and a larger share of the population that is financially excluded. Such economies naturally have more scope to reap significant benefits from these technological transformations. However, these innovations could also undermine the franchise value of existing financial institutions and lead to excessive risk-taking or regulatory arbitrage. Thus, it is important for central banks and the regulatory community to keep track of current developments and to keep regulatory frameworks up to date. He finally outlined the pragmatic strategies for responding to these fintech developments:

  • First, many central banks are equipping themselves to cope with the challenges; they have set up dedicated fintech units or working groups, often with specialized staff members, to keep up with technology developments.
  • Second, central banks are taking a proactive approach to foster technological developments. For example, some central banks are offering research and development support, or plan to engage in such activities themselves. Some central banks are also facilitating knowledge-sharing and the exchange of ideas between innovators, industry participants, and/or academics via forums. Another important measure is to establish controlled regulatory environments, or “regulatory sandboxes,” to allow innovators to test their products and services, sometimes with real customers. By helping with the identification of active fintech players and evolving risks, these initiatives could serve as an effective guide for regulators as they strive to adjust their regulatory standards in response to fintech.
  • The third approach is to pick the low-hanging fruit. To that end, some central banks are collaborating with technology companies to develop applications that aim to improve some long-standing “paper-heavy” inefficient practices in areas such as trade finance and domestic letters of guarantee.
  • Fourth, central banks are striving to maintain a level playing field by promoting interoperability in fintech. For example, central banks may invite technology companies to develop common Quick Response codes for acceptance across different mobile wallets, or internet platform operators, and banks to become stakeholders in an online clearing house.
  • A fifth approach consists in acting tough on those innovations where central banks find it difficult to draw a line. The recent bans on initial coin offering activities imposed by the Chinese and Korean authorities are an example of the readiness of central banks to intervene if needed.

 

Related Links

Keywords: International, Banking, PMI, Securities, Regtech, Fintech, Emerging Markets, BIS

Related Insights
News

IAIS Publishes Drafts of Revised ICP 8, ICP 15, ICP 16, and ICP 20

IAIS published the drafts of revised Insurance Core Principles on Public Disclosure (ICP 20), Investments (ICP 15), Enterprise Risk Management for Solvency Purposes (ICP 16), and Risk Management and Internal Controls (ICP 8), along with a revised draft of the glossary on enterprise risk management (ERM).

November 14, 2018 WebPage Regulatory News
News

MAS Amends Notice 637 on Capital Adequacy Requirements in Singapore

MAS published the final, revised Notice 637 on the risk-based capital adequacy requirements in Singapore.

November 13, 2018 WebPage Regulatory News
News

ESMA Updates Q&A on Implementation of CSD Regulation and MAR

ESMA updated questions and answers (Q&A) documents on the implementation of the Central Securities Depository (CSD) Regulation and Market Abuse Regulation (MAR).

November 12, 2018 WebPage Regulatory News
News

FSB Finalizes and Publishes the Cyber Lexicon

FSB published a cyber lexicon, following the public consultation earlier this year.

November 12, 2018 WebPage Regulatory News
News

SRB Updates Liability Data Reporting Template for 2019

SRB published version 2.7.1 of the Liability Data Reporting (LDR) Template.

November 12, 2018 WebPage Regulatory News
News

ECB to Conduct Comprehensive Assessment of Six Bulgarian Banks

ECB will undertake a comprehensive assessment of six Bulgarian banks. The exercise, comprising an asset quality review and a stress test, follows Bulgaria’s submission of a request to establish close cooperation with ECB on July 18, 2018.

November 12, 2018 WebPage Regulatory News
News

IMF Publishes Reports on the 2018 Article IV Consultation with Chile

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Chile.

November 09, 2018 WebPage Regulatory News
News

PRA Issues PS27/18 on Implementing the Extension of SM&CR to Insurers

PRA published the policy statement PS27/18, which provides feedback to responses to the consultation paper CP20/18, on implementing the extension of the Senior Managers and Certification Regime (SM&CR) to insurers (Part 2).

November 09, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for November 2018

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

November 09, 2018 WebPage Regulatory News
News

FED Finalizes the Large Financial Institution Rating System

FED finalized the new supervisory rating system for Large Financial Institutions (LFIs), to better align with the current supervisory programs and practices for these firms.

November 09, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2204