RBI Financial Stability Report- June 2022

July 2, 2022

The Reserve Bank of India (RBI) recently published its Financial Stability Report for June 2022.

Highlights

This edition of the RBI report includes a survey of international regulatory and supervisory practices, which are applied to BigTech entities.
In its survey, RBI listed Google, Facebook, Apple, Amazon and Alibaba among service providers.
As per RBI, regulators worldwide are aiming to create a balance between risks and benefits from entry of BigTechs in financial domain.
Regulators are adopting authorisation or licensing approach at the entity as well as activity level. It is being guided by principle of ‘flexibility’ and ‘proportionality’ depending on complexity of services offered by BigTechs.

Findings of the report

In the report, RBI maintained that, large technology companies (‘BigTech’) are scaling up and turning into “too-critical to fail” institutions. Thus, its regulators must be aware of their interlinkages with the financial system.
As per report, BigTechs can scale up rapidly and become risky for financial stability. This can arise from increased disintermediation of incumbent institutions.
Complex intertwined operational linkages between financial institutions and BigTech firms could lead to contagion and concentration risks and issues related to potential anti-competitive behaviour.

Major concerns related to BigTechs

Regulators and supervisors worldwide highlight three major concerns related with the presence of BigTechs in financial services. These concerns related to financial stability, legislative and governance issues. Report notes that, BigTechs entered into financial domain as payment service providers. But now they are offering a host of financial services like credit, asset management, crowdfunding and insurance. They increase financial stability risks, by clubbing multiple financial activities through their platforms.

« Previous Post Next Post »