BIS on regulating bigtechs
What new challenges emerge from bigtech participation in financial services, and how should policy makers and regulators tackle them? Those are the questions considered in a new brief from the Bank for International Settlements (BIS) Financial Stability institute (FSI), ‘Big techs in finance: regulatory approaches and policy options.’
It notes that bigtechs are making increasing inroads in finance, and could quickly become ‘too big to fail’. While they may bring benefits in terms of efficiency, customer outcomes and financial inclusion, they also present risks for financial stability and consumer protection, and are not always subject to regulatory rules such as minimum capital requirements and group supervision. “Risks connected with big tech activities in finance may not be fully captured by the regulatory approach up to now, which is geared towards individual entities or specific activities and not the risks that are created by substantive interlinkages within big tech groups and their role as critical service providers for financial institutions.”
The brief suggests that effective oversight requires a wholesale recalibration of the mix of entity- and activity-based rules, in favour of the former in certain areas; a further step would be to consider a bespoke public policy approach for bigtechs. Given the nature of bigtechs, international and cross-sector cooperation and collaboration are also important.