|
|
For a first approach when talking about regulatory challenges in the age if digitalisation in finance, Mr Dombret considered three aspects of financial technology and regulation:
By treating financial innovations equally under the regulatory framework, German regulators follow the maxim of "same business, same risk, same rules". But the important strategic question is: does this principle offer enough orientation for the future - given that no one knows how financial innovations and emerging risks may develop in the future?
Mr Dombret said:
“At the Bundesbank, we have identified some potentially risky Fintech activities that may warrant different regulation at a later stage. For example, various business models have not yet been tested in a downturn. And we cannot predict which of these start-ups is going to evolve into a major player that may end up even becoming too big to fail or too interconnected to fail some time.
“But rules that target a mere theoretical risk might result in overregulation. On the other hand: If we wait too long for financial innovations to settle, risks could increase and adjustments to the existing regime will be more difficult, as vested interests become increasingly powerful. To strike the right balance, a general approach could be to initially concentrate on two aspects: One, setting the right incentives through regulation and two, monitoring Fintech evolution closely.
“Uncertainty about regulation is surely a common ground for all of us. Exchanging knowledge and experiences should be to our mutual benefit. Some may raise the different circumstances in our countries as an obstacle. It is true that digitisation has not spread with the same speed across the globe. Also, regulations differ. My response is that we need this exchange precisely because of our divergent experiences. Given that digital innovations may be "black boxes", learning from each other might help to contain threats from the outset. That way, regulation will not lag one step behind financial innovation. Best practices could be a valuable output.”