basel committee releases fintech consultation

The Basel Committee on Banking Supervision today released a consultative document on the implications of fintech for the financial sector.

The document assesses how technology-driven innovation in financial services, or “fintech”, may affect the banking industry and the activities of supervisors in the near to medium term.

Various future potential scenarios are considered, with their specific risks and opportunities. In addition to the banking industry scenarios, three case studies focus on technology developments (big data, distributed ledger technology, and cloud computing) and three on fintech business models (innovative payment services, lending platforms and neo-banks).

The Committee has identified 10 key observations and related recommendations on the following supervisory issues for consideration by banks and bank supervisors:

  1. the overarching need to ensure safety and soundness and high compliance standards without inhibiting beneficial innovation in the banking sector;
  2. the key risks for banks related to fintech developments, including strategic/profitability risks, operational, cyber and compliance risks;
  3. the implications for banks of the use of innovative enabling technologies;
  4. the implications for banks of the growing use of third parties, via outsourcing and/or partnerships;
  5. cross-sectoral cooperation between supervisors and other relevant authorities;
  6. international cooperation between banking supervisors;
  7. adaptation of the supervisory skillset;
  8. potential opportunities for supervisors to use innovative technologies (“suptech”);
  9. relevance of existing regulatory frameworks for new innovative business models; and
  10. key features of regulatory initiatives set up to facilitate fintech innovation.