This creates the risk that they become “too big to fail” – a problem regulators hoped they would have solved with banks following bailouts in the financial crisis more than a decade ago.
“Certainly a rethink of regulation is warranted and we need a new way forward,” Carstens said, adding that a new “holistic” framework is needed, including requiring Big Tech’s financial services to be separate from others. operations.
Its vast amounts of data provide high-tech companies with valuable insights into potential financial services customers, such as their wealth and spending habits. Companies like Jumia, in Africa, or Grab, in Southeast Asia, are trying to take advantage of it by providing services such as credit and payment processing.
According to Carstens, large technology companies with significant financial activities may also be subject to group-level requirements on governance, business conduct and operational resilience.
Applying “holistic” financial rules to big tech companies would be challenging, given that the sector is already overseen by competition and data privacy regulators locally and internationally, with no clear “lead” regulator, added.
In the European Union, the UK and other countries, operational resilience rules are already emerging for financial regulators to monitor banks’ and insurers’ use of third-party cloud computing companies such as Amazon, IBM and Microsoft to host services.
The $2 billion deal between Microsoft and the London Stock Exchange Group in December was the latest sign of how the lines between big tech and finance are blurring.
According to Carstens, potential benefits from the entry of large technology companies into the financial sector include improved outcomes for clients, increased financial market efficiency, and improved financial inclusion. “It is time to move from theory to practice and consider tangible options for regulatory action,” he said.
