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The group, convened by the organisers of the World Economic Forum at Davos, argues in a position paper published on Tuesday that there is an “urgent need” to do more to ensure the rapid growth of fintech does not become a risk to “systemic stability”.
In addition to the well-flagged dangers from unregulated groups launching fintech products without adequate safeguards, the paper cites the likelihood that traditional finance companies will take excessive chances as they race to keep up with newcomers.
Its authors want a new forum for the public and private sector to prioritise the most promising fintech areas, a debate on the ethical use of financial data, a standardised approach to fintech regulation internationally and a set of industry standards for fintech.
The paper’s contributors were drawn primarily from large financial companies and regulators in the US and Europe. Prominent members include UBS chairman Axel Weber, HSBC chairman Douglas Flint, Deutsche Bank chief executive John Cryan, Zurich Insurance chief executive Mario Greco, Western Union chief executive Hikmet Ersek, Deutsche Börse chief executive Carsten Kengeter, and Andrew Haldane, the Bank of England’s chief economist.
Mr Haldane said the continents of Africa and Asia, which are home to some of the most advanced fintech companies in the world, were “very much part of the regulatory gang” and any resultant regulatory initiatives would be enforced across all regions.
He described the recommendations as “very sensible ones”, citing the risks that rapidly growing businesses were “not fully thinking through the new business that they are taking on”. Global regulators at the Financial Stability Board have already flagged fintech as something that needs “close attention”.
Mr Haldane sees fewer risks in the behaviour of established financial institutions, despite the paper’s warning that “heightened shareholder expectations and intense competition may incentivise the mainstreaming of new technology enabled innovations before the requisite control environment for risk and compliance is in place”.
“It is certainly true that competitive pressures to keep one step ahead can, if taken too far, generate excessive amounts of risk-taking,” Mr Haldane said. “(But) I think the risk culture, not just from the regulator but from financial firms, is much different (than before the crisis); the risk appetite is much diminished.”
Several of the group’s members told the Financial Times that their recommendations would not create barriers to entry for newcomers. [...]
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