Bank of England’s Carney sees risks as fintech booms

The fast-growing financial technology sector could hold big “systemic risks” for the banking sector and the broader economy which need to be addressed by bank regulators around the world, Bank of England Governor Mark Carney said on Wednesday.

Speaking at a conference in Germany organised by the country’s central bank, Carney said financial innovation could reduce costs and improve efficiency. But it could also pose risks to the stability of bank funding, credit quality and even the broader economy.

Carney said authorities had to focus more intensely on regulation and prudential requirements and ensure a “more disciplined management of operational and cyber risks”.

The Financial Stability Board (FSB), which pools bank regulators from around the world, is assessing how suitable existing rules are for addressing “fintech” risks and would report its findings to Group of 20 leaders in July, Carney said.

“The challenge for policymakers is to ensure that fintech develops in a way that maximises the opportunities and minimises the risks for society,” Carney said in his speech.

“After all, the history of financial innovation is littered with examples that led to early booms, growing unintended consequences, and eventual busts.”