[author: Rebecca Grevitt]

The Basel Committee on Banking Supervision (“BCBS“) published a consultative document (BCBS415) on the implications of FinTech for banks and their supervisors.

The BCBS set up a task force to assess how FinTech will affect the banking industry and their supervisors in the near to medium term. The consultative document focuses on future potential scenarios together with the specific risks and opportunities these may bring.

The consultative document also includes case studies on big data, cloud computing and distributed ledger technology as well as case studies on three FinTech business models (neo-banks, payment services and lending platforms).

The BCBS identified key observations and recommendations on supervisory issues to be considered by banks and bank supervisors in the light of the emergence of new FinTech business models and the rapid adoption of enabling technologies. These include the following:

• The opportunities for supervisors to use innovative technologies;
• Principal risks for banks resulting from FinTech developments, including cyber, compliance and operational risks;
• Implications for the increasing use of third parties by banks via outsourcing and/or partnership arrangements; and
• The need to ensure high compliance standards and safety without limiting innovation in the banking sector.

Comments can be made on the consultative document until October 31, 2017.