FSB published a report that examines the market developments and financial stability implications with respect to provision of financial services by bigtech firms in emerging market and developing economies or EMDEs. The report finds that expansion of bigtech firms into financial services in emerging market and developing economies has generally been more rapid and broad-based than that in advanced economies. The range of financial services provided by bigtech firms in emerging market and developing economies is also wider than in advanced economies. The report is being delivered to the G20 Finance Ministers and Central Bank Governors for their virtual meeting on October 14, 2020.
The report focuses on the provision of financial services by bigtech firms in emerging market and developing economies and how the nature and scale of such activities differs from those in advanced economies. It then describes the drivers of demand for—and the supply of—financial services provided by bigtech firms in emerging market and developing economies, including the benefits and risks they pose to financial stability. Finally, the report discusses the challenges to regulating such activities and explains that the entry of bigtech firms into financial services could have a number of implications for official-sector policy in emerging market and developing economies. The report highlights that implications for policy may differ depending on bigtech firms’ mode of interaction with incumbent institutions.
Where bigtech firms partner with incumbents, policymakers should be mindful of the new interlinkages this might create with existing financial institutions. Regulators and supervisors might also wish to ensure that parties to such arrangements put in place clear delineations of responsibility and liability between financial institutions and bigtech firms as well as assess potential concentration and operational risks. Financial sector regulators and supervisors could continue to monitor the nature of the commercial response by incumbent financial institutions’ and the implications for their risk profile, viability, and resilience. Where financial services activities are undertaken by new types of actors, such as bigtech firms, the principle of "same risk-same regulation" should apply. It may also be necessary to update regulatory frameworks to ensure all activities are subject to appropriate regulation and supervision and take into account new barriers to competition that might be introduced. Some financial authorities in emerging market and developing economies have also taken steps to tailor their regulatory approach to the relative size of bigtech firms’ activities in financial services. Regulatory frameworks should also remain flexible to adapt to changing business models and activities. In addition to these general considerations, the policy areas that could present additional risks to financial stability in the context of emerging market and developing economies are data governance, operational risk management, and consumer protection.
Keywords: International, Banking, Insurance, Securities, Bigtech, Emerging Markets, Operational Risk, G20, Developing Economies, Data Governance, Regtech, FSB
Previous ArticleESRB Publishes Risk Dashboard in October 2020
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards
The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.
The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.
The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).
The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The Network for Greening the Financial System (NGFS) published its latest set of long-term climate macro-financial scenarios (Phase IV) for assessing forward-looking climate risks.