Featured Product

    FSB Report Examines Financial Stability Implications of Fintech

    February 14, 2019

    FSB published a report that assesses fintech-related market developments and their potential implications for financial stability. The report assesses the fintech landscape, including market concentration of third-party providers, and provides case studies on fintech credit and payments services. The report offers an overall conclusion on the financial stability implications of fintech developments, along with the possible actions from FSB, BCBS, and IOSCO. Additionally, the Annexes (2,3, and 4) to the report examine fintech developments in China.

    The report establishes that technological innovation holds great promise for the provision of financial services, with the potential to increase market access, the range of product offerings, and convenience, while lowering costs to clients. New entrants into the financial services space, including fintech firms and large, established technology companies (bigtech), could materially alter the universe of financial services providers. Greater competition and diversity in lending, payments, insurance, trading, and other areas of financial services can create a more efficient and resilient financial system. However, heightened competition could also put pressure on financial institutions’ profitability and this could lead to additional risk-taking among incumbents in an effort to maintain margins. Moreover, there could be new implications for financial stability from bigtech in finance and greater third-party dependencies.

    As per the FSB analysis, the following are the key findings on the link between technological innovation and market structure:

    • To date, the relationship between incumbent financial institutions and fintech firms appears to be largely complementary and cooperative.

    • The competitive impact of bigtech may be greater than that of fintech firms. Bigtech firms typically have large, established customer networks and enjoy name recognition and trust.

    • For core operations, reliance by financial institutions on third-party data service providers (for example, data provision, cloud storage and analytics, and physical connectivity) is estimated to be low at present. However, this warrants ongoing attention from authorities.

    BCBS notes that, although most supervisors have some reach over third-party providers—either directly or through contractual arrangements—the majority of supervisors indicate that they supervise third-party providers only in limited cases and have no formal structures in place to do so regularly. Particular attention is being devoted to the third-party dependencies issue, including by the BCBS and IOSCO. Going forward, the FSB Financial Innovation Network (FIN) is planning on, in cooperation with other groups, further exploring third-party dependencies in cloud services and single point of failure risks. Specifically, the FIN is seeking to better understand the market for cloud services for financial institutions (rather than for all clients), including how they manage lock-in risk and cross-border issues. Moreover, it is monitoring the activities of bigtech in finance, including cross-border activities. 

     

    Related Links

    Keywords: International, Banking, Insurance, Securities, Fintech, Financial Stability, Bigtech, Market Structure, FSB

    Related Articles
    News

    PRA Revises Branch Return and Updates Guidance for Regulatory Reports

    PRA published the policy statement PS17/19, which contains the final policy related to changes in the format and content of the Branch Return Form and reporting guidance.

    September 12, 2019 WebPage Regulatory News
    News

    FINMA Outlines Treatment of Stablecoins in Supplement to Guide on ICO

    FINMA published a supplement to its initial coin offerings (ICOs) guidelines, outlining the treatment for stablecoins under the Swiss supervisory law.

    September 11, 2019 WebPage Regulatory News
    News

    Ursula von der Leyen Presents Structure of Next European Commission

    President-elect Ursula von der Leyen has presented her team and the new structure of the next European Commission.

    September 10, 2019 WebPage Regulatory News
    News

    FED Proposes to Revise and Extend Reporting Form on Systemic Risk

    FED proposed to extend for three years, with revision, the Banking Organization Systemic Risk Report (FR Y-15; OMB No. 7100-0352).

    September 10, 2019 WebPage Regulatory News
    News

    EBA Issues Revised List of Validation Rules for Reporting

    EBA published the revised list of validation rules (version 2.9) in its implementing technical standards on supervisory reporting.

    September 10, 2019 WebPage Regulatory News
    News

    Bundesbank Publishes Supplementary Validation Rules for Reporting

    Bundesbank published the updated document containing supplementary validation rules in the context of the implementation of the reporting system at national level.

    September 10, 2019 WebPage Regulatory News
    News

    APRA Licenses Xinja Bank as Authorized Deposit-Taking Institution

    APRA granted Xinja Bank Limited a license to operate as an authorized deposit-taking institution without restrictions, under the Banking Act 1959.

    September 09, 2019 WebPage Regulatory News
    News

    FDIC Proposes Revisions to Regulations on Interest Rate Restrictions

    FDIC proposed revisions to its regulations covering interest rate restrictions that apply to less than well-capitalized insured depository institutions.

    September 09, 2019 WebPage Regulatory News
    News

    EBA Intends to Clarify End-Treatment of Grandfathered Instruments

    EBA announced its intention to clarify the prudential treatment applicable to own funds instruments at the end of the grandfathering period, which expires on December 31, 2021.

    September 09, 2019 WebPage Regulatory News
    News

    IMF Releases Reports on 2019 Article IV Consultation with Saudi Arabia

    IMF published its staff report and selected issues report in context of the 2019 Article IV consultation with Saudi Arabia.

    September 09, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3799