While speaking at the 20th anniversary conference of the Financial Stability Institute (FSI), Agustín Carstens, the General Manager of BIS, highlighted the need for regulatory actions in light of the continued evolution of financial technology. He began by discussing the challenges arising from the assumption of financial stability responsibilities by central banks and then examined the impact of recent technological developments on the relevant policy framework and the role of financial-sector authorities. Finally, he also discussed the planned role of FSI in addressing the challenges at hand.
He highlighted that the recent technological developments further complicate the framework in which central banks and supervisory authorities should perform their responsibilities. The challenge for policymakers is, naturally, to maximize the benefits of fintech while minimizing risks to the financial system. He emphasized that, to move forward, authorities need to:
- Develop a comprehensive understanding of the fintech businesses in their jurisdiction
- Carefully consider the need to adjust the regulatory perimeter to accommodate new entities or activities to ensure adequate control of risks and a level playing field
- Coordinate regulatory actions at the global level to the extent possible
- Embrace technology, keeping in mind that the recent advances in artificial intelligence and its practical application in machine learning, natural language processing, and other advanced analytic capabilities have provided opportunities for developing tools to enhance supervisory capacity
Mr. Carstens noted that recent developments point to an emerging need for regulatory actions. The actions should be proportionate, holistic and, ideally, internationally coordinated. The central banks and supervisory authorities should continue to focus on their core functions related to financial stability and adequate market functioning. He also added that technological developments have strengthened the case for the independence of central banks and supervisory authorities. Independent regulators could be in a better position to take time-consistent actions and pay due attention to different scenarios to ensure that new technologies develop in an orderly way without undermining financial stability. He further discussed that BIS is determined to contribute substantially to the objectives: to develop a comprehensive and integrated analysis of economic and financial stability and to incorporate, in the policy analysis and decision-making processes, all relevant implications of technological innovation for the financial system. He then described several elements of "Innovation BIS 2025," which is the new medium-term strategy of BIS:
- To continue the efforts to develop a conceptually integrated framework for financial stability policies
- To take several initiatives to better understand the implications of technological developments for the financial system and help stakeholders to make effective use of them in their own policy formation
- To strengthen the efforts to contribute to the dissemination of good policy practices, to support capacity-building, and to facilitate interaction among regulators
Mr. Carstens mentioned that FSI will play a key role in several of these initiatives. FSI can contribute to the efforts of financial-sector authorities to address the new challenges by facilitating the dissemination of information and analysis on relevant topics and by fostering the exchange of practices and experiences among supervisors. Mr. Carstens further stated that FSI will create a repository of technology-related regulatory developments. In addition, it will continue developing comparative studies on distinct regulatory and supervisory approaches followed in different jurisdictions. Finally, FSI will further develop a recently created informal network of technology specialists in supervisory organizations to exchange practices and experiences on technological developments.
Related Link: Speech
Keywords: International, Banking, Financial Stability, Proportionality, Fintech, Regtech, Suptech, FSI, BIS
Previous ArticleOCC Updates Recovery Planning Booklet of the Comptroller’s Handbook
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.
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).
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.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
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.
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.
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.
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.
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.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.