BoE Governor Mark Carney Flags Fintech “Systemic Risks”

Carney reiterated the bank's commitment to allowing non-traditional financial services companies access to authorisation.

Innovations in the fintech landscape have become one of the “systemic risks” that bank regulators around the world should be worried about, said the head of the UK’s central bank Mark Carney at a G20 conference in Wiesbaden, Germany.

The Governor of the Bank of England told an international group of policymakers and regulators that the Financial Stability Board (FSB) has started to examine whether the growing fintech sector presents any risk to the financial system. The FSB will determine its next steps in July.

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The FSB’s scrutiny comes as financial companies are grappling with blockchain, the open-ledger technology that underpins bitcoin.

“The opening up of the customer interface and payment services business, could, in time, signal the end of universal banking as we know it. If today’s universal banks have less stable retail funding and weaker, more arms-length client relationships, the volatility of their deposits and liquidity risk could increase,” Carney told an audience in Wiesbaden.

Mr. Carney, who is also chairman of the Financial Stability Board, said the diversity of the system, which includes peer-to-peer payments companies and payments networks, could “reduce systemic risks” and promote competition. Carney also welcomed the possibilities of a “fintech revolution that will democratise financial services.”

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Canadian Governor of the Bank of England reiterated his commitment to allowing non-traditional financial services companies access to authorisation from the Bank.

The UK regulator last year launched the so-called fintech accelerator to work in partnership with fintech firms on the challenges that face the central bank. The accelerator works with new technology firms to help the regulator harness fintech innovations for central banking.

In return, it will offer firms the chance to demonstrate their solutions for real issues facing us as policymakers, together with the first client reference that comes with it.

Carney reiterated the bank’s commitment to aiding development of the fintech sector, with regulatory sandboxes for product testing and the active development of prototype technologies. He said a new supervisory approach could include “regulatory sandboxes”, such as the one already set up by Britain’s Financial Conduct Authority which allows start-ups to test products under regulatory supervision.

Finally, he warned against excessive hype saying that: “Where are we along the cycle from the technology trigger to the ‘peak of inflated expectations’ and the trough of disillusionment? Will Fintech change the world as we know it? Is there something new under the sun?”

 

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