Basel Committee Publishes Report on the Digitalisation of Finance
? The document from Bank for International Settlements (BIS) provides a comprehensive overview of the digitalisation in finance, highlighting the opportunities it presents for innovation and efficiency, the competitive pressures it introduces and the array of risks that need to be managed through adapted regulatory measures and supervisory practices.
? Technological Innovations and Applications: It discusses the deployment of technologies like artificial intelligence (AI), machine learning (ML), cloud computing and distributed ledger technology (DLT) in banking. Banks are integrating these technologies at various levels, from back-office operations to customer-facing interactions, enhancing operational efficiencies and customer services.
? New Competitors and Business Models: The entry of fintechs and big tech companies has introduced new competitive dynamics in the banking sector. These entities often operate under lighter regulatory frameworks, leveraging their technological prowess to offer innovative financial products and services that challenge traditional banks.
? Risks: The BIS paper outlines multiple risks associated with digitalisation, including strategic risks from increased competition, reputational risks linked to technological failures or data breaches, and operational risks from reliance on complex systems and third-party providers.
? Regulatory and Supervisory Responses: It details how regulatory bodies are adapting to the digital transformation. This includes expanding regulatory frameworks to incorporate new digital banking models and establishing guidelines to manage risks associated with technology adoption in financial services.
Original source: d575.pdf (bis.org)