The Financial Stability Institute (FSI) of Bank for International Settlements (BIS) published a paper that offers policy implementation insights on the regulatory initiatives developed in China, European Union, and the United States to address new challenges presented by big tech firms. The report focusses on five policy domains: competition, data, conduct of business, operational resilience, and financial stability. The report notes that there exists a compelling case to seek international consistency of policy developments.
The report highlights that the policy initiatives generally seek to achieve a balance between addressing the different risks posed by big tech firms and preserving the benefits they bring in terms of market efficiency and financial inclusion. Policy initiatives are addressing the operational resilience of big tech firms. These typically apply to big tech firms either as providers of financial services or as third-party service providers of financial firms. The recent initiatives constitute important steps in addressing risks posed by big tech firms, though additional regulatory responses might be needed. These will include the development of entity-based rules to address the unique combination of risks posed by big tech firms. These initiatives represent important steps in combating relevant risks posed by big tech firms. It seems likely at this stage that new policy developments may need to introduce further specific controls for big tech firms if they continue, as expected, gaining presence in the financial system either directly or through their engagement with financial institutions.
As big tech firms continue to gain prominence in the financial system, additional policy responses might be necessary. It is also very likely that new policy actions will largely need to follow an entity-based approach and require close cooperation between competition, data, and financial authorities. Moreover, given the cross-border scope of big tech activities, enhanced international regulatory cooperation is essential. There is already a compelling case to seek international consistency of policy developments. Given the cross-border scope of the activities performed by big tech firms, international regulatory cooperation seems essential. Several proposals have been put forward to enhance global collaboration on the design of policies aiming to address the challenges posed by digital technologies. There have also been efforts by international standard-setting bodies to ensure that existing financial regulation (particularly in the area of payments) properly covers the activity of new nonbank players. As the need for specific rules for big tech firms may gain ground in different jurisdictions, the availability of common international guidance on the matter should help contain the risk of regulatory fragmentation.
Keywords: International, Banking, Bigtech, Fintech, Operational Resilience, Regtech, Guidance, FSI, BIS
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