Bank for International Settlements
Big techs in finance: regulatory approaches and policy options
Juan Carlos Crisanto, Johannes Ehrentraud and Marcos Fabian

Regulatory bespoke approach for big techs

Short technical note written by the Financial Stability Institute (FSI) of the Bank for International Settlement that provides an overview of the current regulatory landscape for “Big techs” operating in finance, and some considerations to bear in mind for policymakers.

The report´s key takeaways are as follows:

  • Low relative weight of financial activity in Big Tech, although with great potential growth. According to the report, “at present, financial services represent a relatively small part of big techs’ overall activities, though this can change rapidly due to the unique features of their business models and they could quickly become systemically important – or “too big to fail”.
  • The financial activity of Big Techs must be subject to the principle of “the same regulation for the same activity”. According to the report, “Big techs’ financial operations are subject to the same requirements as those of other market participants. As such, big techs need to hold appropriate licences to perform regulated financial activities or provide their services in partnership with financial institutions that meet the regulatory requirements”.
  • New risks associated with Big Techs, regarding their role as technology providers in the financial sector. The report points out that “risks connected with Big Tech activities in finance may not be fully captured by the regulatory approach up to now, which is geared towards individual entities or specific activities and not the risks that are created by substantive interlinkages within big tech groups and their role as critical service providers for financial institutions (i.e. cloud computing and data analytics).
  • Regulatory bespoke approach for big techs: The report calls for the convenience of “an effective oversight of big tech activities in finance, considering recalibrating the mix of entity-based and activity-based rules”, suggesting “to assess the possibility of introducing a bespoke approach for big techs encompassing a comprehensive public policy framework”. 

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