Financial Stability Institute (“FSI”) publishes Bank for International Settlement (“BIS”) research paper on Fintech regulation

The FSI has published the BIS’s research paper titled “Fintech regulation: how to achieve a level playing field” in February 2021 (the “Paper”). The Paper explores how regulation should evolve to encourage fair competition between traditional banks and new fintech and big tech players.

The Paper explores topics such as:

(a) 

The current regulatory framework

(b) 

Activity based vs entity based regulatory requirements:

The Paper encourages an activity-based, entity-based or mixed approach towards regulation.

The Paper concludes that regulatory areas such as Anti-Money Laundering and Counter-Financing of Terrorism should be activity based as there is little reason to support heterogeneous rules for different providers of a particular service, even if they also perform other activities, whilst prudential regulation of risk etc. should be entity-specific.

The Paper also notes some areas may require a mixed approach, e.g. cyber security. 

(c) 

Fair competition between traditional banks and new fintech/big tech players:

The Paper discusses the regulatory approach to competition law for preventing the abuse of market dominance.

(d) 

Harmonisation and moving towards a more balanced regulatory framework:

The Paper encourages regulatory frameworks to incorporate entity-based requirements for big tech in areas such as competition and operational resilience to address the risks stemming from the different activities they perform. The Paper argues that this strategy will not only help regulation to achieve its primary objectives, but will also serve to mitigate competitive distortions.

Please refer to the Paper for more details.