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Fintech firms do not threaten financial stability - FSB

04 November 2016  |  9539 views  |  0 World in hand

Fintech firms do not pose an immediate threat to international financial stability, according to a G20-backed watchdog, which nevertheless says that it is monitoring the nascent sector carefully.

Set up by the G20 in the wake of the 2008 economic crisis, the Financial Stability Board (FSB) has been working over the last few years to coordinate efforts to ensure a repeat of the disaster does not occur.

While the emerging fintech scene is something that the board has been keeping tabs on, secretary general Svein Andresen says: "We have seen many interesting trends over last few years in fintech. However, it is quite possible that a number of the changes either do not pose new risks or may pose risks that are already effectively regulated."

At a Chatham House conference, Andresen says that the board has been "explicit in our desire to look at both financial stability benefits and risks, so as not to bias our work against fintech".

With that in mind, the FSB has carried out work relating to distributed ledger technology and P2P lending. Meanwhile, the group is also undertaking a study of the key elements underlying fintech innovations, identifying three promises associated with the sector: greater access to and convenience of financial services; greater efficiency of financial services; and a push toward a more decentralised financial system.

"These elements have financial stability implications, especially if the trend toward adoption of fintech continues. As a result, authorities should be vigilant and should actively monitor the effects that fintech innovations have on specific products and services, as well as on incumbent financial institutions, financial markets, and the economy more broadly," says Andresen.

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