Public trust in financial institutions has remained stable over the past year, while trust in other sectors (such as politics and the public sector) has decreased. This has emerged from a DNB survey held among more than 2,200 Dutch households.Read more
Rise of BigTechs requires adjustments in financial supervision
The rising importance of BigTechs such as Google, Amazon, Apple and Facebook in the financial sector requires special attention from supervisory authorities such as De Nederlandsche Bank (DNB). Legislation and regulations need to be adapted in response to new risks, more European-level supervision needs to be developed, focussing on closer cooperation between different supervisors, and financial institutions will have to be seriously challenged on the sustainability of their business models.
Boundaries are blurring and business models are under pressure
This becomes evident from DNB's latest report on developments in the financial sector “Changing landscape, changing supervision”. “BigTechs bring benefits, such as improved user experience, more innovative services and increased efficiency," said Steven Maijoor, DNB's new Executive Director of Supervision at today's press meeting. “These parties are expanding their activities into various parts of the value chain, such as payments and other financial services. Boundaries between supervised and non-supervised entities are blurring due to digitalisation, which means new risks may emerge – in the area of IT, for instance. It also means that business models are coming under increasing pressure.”
Trust in the financial sector
In the past year, the pace of digitalisation accelerated due to the COVID-19 pandemic. According to the DNB report, ongoing digitalisation, new technologies and the rise of BigTechs require DNB and other supervisory authorities to review their supervisory strategies. Maintaining confidence in the financial sector, safeguarding financial stability and ensuring soundness, integrity and resolvability of financial institutions remain key.
New rules for new risks
BigTechs create value in the financial services sector by providing platforms for bringing together demand and supply in various markets. As the number of parties operating through the platform grows, and with it the volumes and variety of data, the value of the platform will grow for the parties in the network. At the same time, concentration risks in service provision, distribution and data also grow. This calls for new rules for the supervision of the links in the value chain, new rules for distribution and new security safeguards for consumers’ control of their data.
More cooperation between supervisors
Contrary to many traditional banks and insurers – and many FinTech firms, too – BigTechs operate at international or even global level. This means adequate supervision of the financial activities of BigTechs is only possible at an international level, and that is why more European-level supervision is essential. In response to the platformisation of activities, supervisory authorities with mandates in the areas of cybersecurity, data protection, competition and financial supervision should cooperate more closely.
End of press release
For more information, please contact Tobias Oudejans by telephone at 06-52496961. See our DNBulletin.