Global banking authorities stated in a report on Thursday that the digitalisation of banking and the introduction of Big Tech into the industry accentuate already-existing dangers and create new vulnerabilities in the financial system that may require new regulations to address.
The Basel Committee of Banking Regulators stated that new risks are created by the spread of open banking, which is the practice of external fintechs sharing customer data with banks, the growth of cloud computing, which involves the use of outside tech companies to support key banking services, the development of AI, and the use of distributed ledger technology (DLT).
Laptops 1000“These can include greater strategic and reputational risks, a larger scope of factors that could test banks’ operational risk and resilience, and potential system-wide risks due to increased interconnections,” it stated.
According to the committee’s report, external operators that banks use generate “new nodes of channels and interconnections” because they might not be held to the same regulatory standards as lenders.
Reports are frequently created by regulators to gather information and examine an industry to provide the groundwork for future regulations.
“Where necessary, it will consider whether additional standards or guidance are needed to mitigate risks and vulnerabilities,” the panel stated.
The members of the Basel Committee, who are central bankers and banking regulators from the G20 economies and other nations, pledged to implement the regulations that the committee authorises.
