FSB PUBLISHES A SPEECH ON ITS WORK ON FINTECH

On 3 November 2015, Svein Andresen, Secretary General of the Financial Stability Board (FSB) gave a speech about global regulatory developments and their impact on industry. In the speech, Mr Andresen discussed the FSB’s work on the implementation and effects of recent G20 reforms and provided an insight into the FSB’s work in relation to FinTech (this article will focus on the latter).

The key points from his speech are:

The FSB recognises that the importance of FinTech is likely to increase, and this may cause significant changes in the financial system. The FSB is aware of the need to understand new innovations, since they potentially pose new risks and could impact the way in which the financial markets operate. Certain risks may already be effectively regulated and the FSB is conscious of the need to balance the mitigation of emerging risks with the need to foster innovation that can provide benefits to society.

The FSB will monitor and assess developments, as well as work with other bodies by collaborating and sharing information with the purpose of identifying the issues that require policy attention. The FSB has made progress with regard to considering the implications of certain FinTech innovations, such as distributed ledger technology. The FSB is conducting an in-depth study of the implications for financial stability of peer-to-peer lending with the Bank for International Settlements Committee on the Global Financial System, and is beginning work to understand the financial applications of machine learning. The FSB are undertaking “stocktakes” of the work carried out by the FSB and Basel Committee members at national levels on FinTech. Furthermore, the FSB has also looked into the experimentation by firms with FinTech and their experiences with innovation facilitators.

The FSB has identified some “elemental promises” common to a broad range of FinTech innovations:

■ greater access to and convenience of financial services;

■ greater efficiency of financial services; and

■ a shift towards a more decentralised financial system.

The FSB identified that FinTech innovations are challenging traditional financial institutions and that this may have implications for financial stability. Accordingly, the FSB encourages regulators to remain vigilant and monitor the effects of such innovations, and to consider how their ability to regulate the financial markets may be affected by such innovations.

Mr Andresen concluded that the regulatory community must not become complacent, highlighting that the FSB must stay aware of how the financial system adjusts to new innovations and that regulators must learn from the financial crisis regarding the need for a coordinated global response to regulating global firms and innovations.