Things of Note - June 26, 2019
Some significant reading in the regulatory / policy space this week (No Libra content here).
Both the BIS and the Bank of England have issued interesting papers this week.
First the BIS pre-released this Big Tech in Finance chapter - ahead of full publication of the 2019 Annual Economic Report.
I summarised it briefly here.
They explore (no conclusions) the impact that ‘Big Tech’ (defined for this context as Alibaba, Amazon, Facebook, Google and Tencent) is having in society - from a data, data privacy, competition and financial market stability perspective.
Overall summary is that the extraordinary nature of these new tech / data - particularly as it pertains across regulatory territories - means a new Regulatory Compass is required. One which can guide / balance policy tools with global outcomes for tech companies and consumers.
Second, the Bank of England paper on the Future of Finance was also published by Huw van Steenis this week.
It’s a far longer read than the BIS chapter, but better structured and practically accessible.
Change is coming - a new economy is emerging driven by changes in technology, demographics and the environment. The UK is also undergoing several major transitions that finance as an industry has to respond to.
With one eye on China’s rapid evolution in payments and a strong element of nostalgia for the UK’s historic relevance in global finance, they take a Brexit-neutral look and make 9 summary recommendations for the Bank to take a sustained leadership role to:
Shape tomorrow’s payment system
Enable innovation through modern financial infrastructure
Support the data economy through standards and protocols
Champion global standards for markets
Promote the smooth transition to a low-carbon economy
Support adaption to the needs of a changing demographic
Safeguard the financial system from evolving risks
Enhance protection against cyber-risks
Embrace digital regulation
Imagining an improved future state (2029), some of the themes they would like to see that contribute to the overall Vision:
Finance serving the digital economy
making flow of finance fair, efficient and accessible;
supporting the ownership and portability of data by individuals and businesses;
embracing AI, Data and Technology to catalyse innovation and competition.
Finance supporting major transitions in society
giving the UK further relevance as global finance evolves;
sustainable development of savings/retirement products;
recognising both increased longevity and ethical investment appetites.
The system becoming more resilient to old and new risks
for incumbent firms to sustainably respond to the disintermediation and unbundling through data and technology;
for the industry to cooperatively focus on cyber-risk resiliency;
for regulation and surveillance to adapt to be more effective in this digital economy.
Wherever your focus/jurisdiction, I recommend you download the Bank of England paper - the themes explored are globally relevant and far from being solved.