The Bank for International Settlements ("BIS") urged regulators to implement policies and regulations that address the emergence of big technology ("big tech") firms in financial markets.
In its Annual Economic Report, BIS advised regulators to address the potential threat to financial stability, competition and data protection posed by the emerging big techs (e.g., Alibaba, Amazon, Facebook, Google and Tencent). The report says regulators should aim to close regulatory gaps between big techs and other financial institutions. BIS encouraged regulators to extend applicable existing banking regulation to big techs using the "basic principle" of "same activity, same regulation."
However, in cases where big techs have "wrought structural changes . . . outside the scope of existing financial regulations," BIS advocated for the creation of new rules. BIS stated that different firms may require different approaches, noting that facilitating the entry of big techs into financial services may in some cases be conducive to greater competition and, in other cases, to less.
The report considers areas where big techs may have long-term competitive advantages over traditional financial services firms. It also considers the entry of technology firms into a variety of financial service businesses, including payments, and consumer and small-business lending and insurance. Finally, a significant portion of the report is taken up by raising privacy concerns and other issues as to how data may be used or misused.
To navigate potential policy choices, BIS created a "regulatory compass" to help regulators. The compass is broken down by:
North, which encourages new entry;
South, which restricts the entry of big techs;
East, which endows customers with property rights over their data; and
West, which limits big techs' use of customer data.