The Basel Committee on Banking Supervision (Basel Committee) has published a sound practices report, Implications of fintech developments for banks and bank supervisors. The report assesses how technology driven innovation in financial services may affect the banking industry and the activities of supervisors in the near to medium term.
The Basel Committee recognises that it should first contribute to a common understanding of risks and opportunities associated with fintech in the banking sector by describing observed practices before engaging in the determination of the need for any defined requirements or technical recommendations. The Basel Committee acknowledges that fintech-related issues cut across various sectors with jurisdiction-specific institutional and supervisory arrangements that remain outside the scope of its bank-specific mandate.
The Basel Committee has identified in the report 10 key implications and related considerations for banks and bank supervisors:
- the overarching need to ensure safety and soundness and high compliance standards without inhibiting beneficial innovation in the banking sector;
- the key risks for banks related to fintech developments, including strategic / profitability risks, operational, cyber- and compliance risks;
- the implications for banks of the use of innovative enabling technologies;
- the implications for banks of the growing use of third parties, via outsourcing and/or partnerships;
- cross-sectoral cooperation between bank supervisors and other relevant authorities;
- international cooperation between bank supervisors;
- adaptation of the supervisory skill set;
- potential opportunities for supervisors to use innovative technologies;
- relevance of existing regulatory frameworks for new innovative business models; and
- key features of regulatory initiatives set up to facilitate fintech innovation.