LONDON – Regulators have little understanding with banks about the risks of building a digital marketplace with technology companies and need a framework to identify potential infections if something goes wrong, the European Union’s banking watchdog said on Tuesday.
The European Banking Authority’s warning is the latest sign that financial regulators are beginning to pay more attention to the growing connection with Big Tech financing, such as in cloud computing.
Financial and technology companies are coming closer together as banks establish digital marketplaces such as payments and mortgages, as well as other financial and non-financial services, a process that has accelerated since the onset of the epidemic.
This means customers can make payments using their mobile phones or buy items that link directly to their bank accounts.
This so-called platformization helps banks reduce costs and reach a wider range of customers, and includes partnerships with tech groups.
Apple Pay, for example, allows bank debit and credit card holders to set up Apple Wallet to make payments. Google and Citi have combined to enable users of the Google Pay app to open a checking account with Citi.
But EU Watchdog says reliance on digital platforms for service marketing and delivery creates new types of financial, operational and respectable interdependence.
Monitoring market developments for trend regulators and any risks from this interdependence is creating “some challenges,” Watchdog said.
“Indeed, it appears that the vast majority of competent authorities currently have limited ideas of platform-based business models,” EBA said.
The EBA says it proposes to build a potential framework for collecting information about reliance among banks on digital platforms and to create indicators for assessing potential concentrations, transitions and systemic risks. But it says there is no need for new legislation at this stage.
Watchdog has called on the EU to update guidelines when digital activities should be considered as a cross-border provision of services and therefore come under EU and national law to require regulators to provide information to improve visibility.
The EBA said a small number of banks said they had encountered some problems accessing the digital platform which they deemed fair.
By Hu Jones
This News Originally From – The Epoch Times