Bank of England (BoE) may tighten controls over cloud data providers and other tech companies to counter potential risks to financial system stability resulting from the rise of FinTech, Deputy Governor Dave Ramsden said.
BoE has previously expressed concerns over the dependence of financial companies, especially FinTechs, on third-party tech companies for key parts of their operations which might now intensify, Ramsden said.
“We plan to further analyse whether we need even more powerful tools to manage the risk that critical third parties, potentially including the cloud and other major technology vendors, may pose to… the Bank’s objectives”, Ramsden added.
Ramsden said the BoE took this step to help smaller financial firms with more direct means to access its high-value payments system which has been dominated by large banks and processing companies.
Other steps included standardising the identification of companies involved in financial transactions and analysing whether AI could ease the burden of regulatory compliance.
Regulators around the world have increased scrutiny over outsourced functions over concerns that core services provided by financial firms to clients may be vulnerable to third-party outages.
While the UK government is keen to promote the FinTech sector, it believes a more nimble regulation will allow it to gain an advantage in the EU as they have lesser access there due to Brexit.
The BoE has said it will not reduce any regulatory standards but there is a possibility of more streamlined regulation for small banks and businesses in certain areas of insurance.
Recently, Chancellor of the Exchequer Rishi Sunak proposed that the BoE collaborates with the Department of Finance on the implementation of a digital version of the British pound to compete with cryptocurrencies, which he dubbed ‘Britcoin.’
The government is also consulting on proposals to relax stock market listing rules, fearing Britain may be less attractive than the US as a listing venue.
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