Mark Carney, the Governor of the Bank of England, has given a wide-ranging speech on FinTech which he delivered at the Deutsche Bundesbank G20 conference on 25 January 2017. It was entitled “The Promise of FinTech – Something New Under the Sun?”. Whilst recognising that FinTech’s true promise springs from its potential to unbundle banking into its core function, systemic risks will evolve. The challenge for policymakers is to ensure that FinTech develops in a way that maximises the opportunities and minimises the risks for society.

Mr Carney surveyed the current FinTech landscape and then turned to the broader public policy issues – conduct, greater inclusion, more competition and data protection. The Financial Stability Board is assessing how FinTech developments are affecting the resilience of the global financial system; by identifying the risks associated with new and existing financial institutions and activities, and the supporting financial market infrastructure. The FSB’s approach is that there is nothing new under the sun. There need to be consistent approaches to similar activities undertaken by different institutions that give rise to the same financial stability risks. However, just because an activity is outside the regulatory perimeter doesn’t necessarily mean it needs to be brought inside.

Some of the most important questions the FSB is considering include:

• Which FinTech activities constitute traditional banking activities by another name and should be regulated as such?

• How could developments change the safety and soundness of existing regulated firms, particularly those judged to be systemic, and what supervisory responses for those firms should be put into place?

• How could developments change potential macroeconomic and macro financial dynamics including disruptions to systemically important markets?

• What are the implications for the aggregate level of cyber and operational risk in the financial system?

• Which FinTech activities could become systemic because they provide new critical economic functions or market infrastructure (for example if certain digital wallets become dominant) and potentially merit higher standards of operational risk oversight?

Mr Carney recommended refreshing supervisory approaches:

1. Adopt regulatory sandboxes more widely.

2. Adapt existing authorisation processes to ensure they do not unnecessarily block new business models and approaches.

3. Expand access to central bank money for non-bank payments service providers.

4. Develop Proofs of Concepts with new enabling technologies from machine learning to distributed ledgers.