The Banking Executive Magazine - August Issue 2022

ISSUE 164 AUGUST 2022 the BANKING EXECUTIVE 1 Editorial REGULATING FINTECH The emergence of FinTechs and big techs represents a major source of disruption in the market for financial services. Regulators are gradually adjusting their policy frameworks in order to cope with the risks that the new products and players pose, but without jeopardizing the benefits they bring in terms of competition, efficiency and financial inclusion. Still, there is a sense that we need a more comprehensive policy overhaul, in particular with regard to big tech platforms that offer a large variety of financial and non-financial services. Among other things, that comprehensive framework should aim at reducing competitive distortions that could penalize either incumbents or new players. In this connection, the slogan of same activity-same regulation is often heard as the possible basis for regulatory reform. This phrase basically suggests moving from a framework for entities with a specific license or charter (entity-based regulation) to a system of rules on specific activities, which would be applied uniformly to all types of entity involved in a specific activity (activity-based regulation). When the banking industry uses this phrase, they are underlining the need to prevent big techs from wielding a competitive advantage due to their lighter regulatory burden compared to commercial banks. In particular, the industry is concerned that bank subsidiaries performing a specific activity are subject to rules that do not apply to non-banks performing the same activity. When regulators consider the merits of an activity-based regulatory approach, they stress the need to reduce the scope for regulatory arbitrage. In other words, the aim is to prevent entities lying outside their regulatory perimeter from conducting regulated activities. Dr. Joseph Torbey, Chairman - World Union of Arab Bankers