BigTech in Financial Services - 0 views
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John Kiff on 25 Jan 22According to a new IMF Fintech Note, the rapid and significant expansion of BigTechs in financial services and their interconnectedness with financial service firms are potentially creating new channels of systemic risks. To achieve effective implementation and multiple objectives of financial regulation and supervision, a hybrid approach, combining a mix of entity- and activity-based approaches, is needed. Home supervisors should establish an entity-based approach to cover the global activities of a BigTech group, while host supervisors could in principle address local risks and concerns mainly through activity-based regulations. Cross-sector and cross-border cooperation are key in determining the future of the regulatory architecture. However, it can take several years before regulators have achieved a sufficiently robust legal and regulatory framework to address all risks arising from BigTech in financial services, and short-term solutions may be needed. In the interim, regulatory authorities should actively use all existing regulatory powers to manage risks, while BigTech should adopt and improve governance frameworks through industry codes of conduct and enhanced disclosures. Options should be explored to promote global consistency in the treatment of BigTechs, through existing or new global bodies with a broad mandate. The note recommends that the Joint Forum's 2012 Principles for the Supervision of Financial Conglomerates be reviewed to address regulatory gaps.