Carney warns of intense regulatory focus for FinTech

Governor of the Bank of England warns as risks emerge from new technologies, authorities will pursue regulatory focus.

Mark Carney, governor of the Bank of England, has sent a warning to the FinTech industry, saying authorities will pursue a more intense regulatory focus, as liquidity, operational and systemic risks emerge.

Speaking at the Deutsche Bundesbank G20 conference this week, Carney outlined plans to ramp up regulatory efforts around FinTech.

He explained some innovations could generate systemic risks through complexity, greater herding, liquidity risks, more operational risk and regulatory arbitrage.

“As those risks emerge, authorities can be expected to pursue a more intense focus on the regulatory perimeter, more dynamic settings of prudential requirements, a broader commitment to resolution regimes, and a more disciplined management of operational and cyber risks,” Carney said.

He added authorities will also be more alert to potential impacts on the existing core of the system, including business model analysis and market impact assessments.

Carney told delegates to help realise FinTech’s promise, authorities should ‘refresh’ supervisory approaches, through regulatory sandboxes and adapting existing authorisation processes.

The Financial Conduct Authority’s regulatory sandbox - launched as part of the regulators’ Project Innovate in 2014 - provides a ‘safe space’ for FinTech companies to test products, services and mechanisms in a live environment.

Carney added the Bank of England’s FinTech accelerator is currently developing proof of concepts with new technologies like machine learning and blockchain.

Although he warned these technologies “could fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks.”