Featured Product

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    September 20, 2021

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking. The review also contains a chapter on recent financial market developments with two notably relevant information boxes: one on the booming demand for investment products with environmental, social, and governance (ESG) benefits and the other on the dynamics of European money market fund flows during the March 2020 turbulence.

    The special feature on fintech firms examines trends in equity funding and the underlying country-specific drivers. It first provides an overview of investment in fintech firms across time, regions, market segments, and investment stages. The special feature then analyzes which factors are associated with differences in fintech firms' capital-raising activity across countries. This is among the first studies to address whether targeted policy measures, in particular regulatory sandboxes, improve fintech firms' access to finance. The Quarterly Review special feature highlights that fintech firms have raised over USD 1 trillion in equity globally since 2010. While the investment landscape was initially quite concentrated, it has become more diverse, both geographically and across market segments. Equity funding for fintech firms is higher in countries with more innovation capacity and better regulatory quality; the funding also increases after the introduction of regulatory sandboxes. Early-stage venture capital investment is higher after merger and acquisition activity by large banks, but not after such activity by big tech firms. Market segments such as "cryptocurrency and blockchain" and "big data, artificial intelligence (AI) and machine learning" dominate the funding landscape, though smaller segments are gaining ground.

    The special feature on COVID-19 policy measures to support bank lending informs the discussion on the way these policy measures supported the flow of bank credit via two main mechanisms—by enhancing bank lending capacity and by providing incentives for banks to lend. Evidence shows that both types of measures contributed to lending growth. Some measures strengthened the lending capacity of banks by preserving their capital and encouraging flexibility in loss accounting; others, such as state-backed loan guarantees or funding for lending programs, incentivized banks to use their available capacity. Strong banks with ample balance sheet capacity could accommodate the large drawdown of corporate credit lines in the first months of the pandemic. Policy support appeared to foster further lending. Banks that increased their lending capacity increased their lending more than other banks. More generous guarantee programs were associated with banks reporting looser lending standards and higher lending growth. Benefiting from such programs, small and medium-size enterprises expanded their borrowing, especially those in sectors hit hard by the pandemic. To phase-out the support measures, the sequence, timing, and speed of withdrawing these policy measures are the keys. 

    Within a box on the market developments in sustainable finance, the review notes that the demand for investment products classified as delivering ESG benefits is booming. While growth in ESG assets shows no signs of abating, lack of standardization and the ensuing classification issues make it difficult to pin down precise amounts. One set of industry estimates relies on a broad definition that includes various approaches to integrating ESG criteria as well as "thematic," "impact," and "community" investing. On this basis, some estimates indicate that ESG assets rose by nearly one third between 2016 and 2020 to USD 35 trillion, or no less than 36% of total professionally managed assets. Another set of estimates—based on a narrower definition and including only mutual funds and exchange-traded funds (ETFs) that self-report as having ESG or socially responsible investment (SRI) mandates—shows even faster growth but at lower levels. The assets managed by these funds have soared over the past five years, more than tenfold, and now stand at approximately USD 2 trillion. However, limited disclosure requirements result in an incomplete picture of which investors hold ESG assets, especially equity instruments. The review also notes that there are signs that ESG assets' valuations may be stretched and that these, along with certain other, considerations suggest developments in the ESG market should be closely monitored.

     

    Related Links

    Keywords: International, Banking, Quarterly Review, Sustainable Finance, ESG, COVID-19, Fintech, Credit Risk, Lending, Regtech, BIS

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News
    News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News
    News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582