While delivering a keynote speech at the L’Agefi’s 10th Meeting of the Financial Industry, Erkki Liikanen, Chair of the Trustees of the IFRS Foundation expressed his views on whether big tech is a threat to financial stability. He noted that certain aspects of the financial system are inefficient and even outdated. The entry of big tech and fintech firms poses challenges and represents an opportunity to energize the market for payment services, credit provision, and insurance, among other services. He also shared his observations on the actions policy makers should take to deal with the resulting challenges.
Mr. Liikanen spoke about the BIS contribution to the discussion on the role big techs. He said, "Professor Hyun Song Shin, economic adviser and head of research for the BIS, sets out both the opportunities and risks associated with big tech in finance. In his regulatory compass, the menu of policy choices can be reflected to help policymakers navigate this complex landscape." Building on the ideas of Professor Hyun Song Shin, Mr. Liikanen offered following three observations:
- Policymakers need to decide how much to encourage big tech to enter finance—should policies promote the entry of big techs or restrict it.
- Big tech tests the regulatory perimeters of data protection, competition policy, and now financial regulation. As such, regulation that is fit-for-purpose will require enhanced cooperation among multiple regulatory bodies. The entry of big tech into financial services requires cooperation of different regulators. Joined-up thinking is essential to achieving a regulatory environment fit for purpose.
- There is a need to recognize the cross-border nature of the big tech and fintech challenge and respond appropriately.
He concluded that innovation is here to stay and it will bring both benefits and challenges. However, a balanced approach is needed to reap the benefits of financial inclusion and efficiency and ensure a level playing field between big techs and banks.
Keywords: International, Banking, Big Tech, Fintech, Financial Innovation, Financial Inclusion, BIS, IFRS
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