Author information:
Roland Bódi: Magyar Nemzeti Bank, Senior Legal Expert. E-mail: bodiro@mnb.hu
Péter Fáykiss: Magyar Nemzeti Bank, Director; Corvinus University of Budapest, PhD Candidate. E-mail: faykissp@mnb.hu
Ádám Nyikes: Magyar Nemzeti Bank, Analyst. E-mail: nyikesa@mnb.hu
Abstract:
When it comes to systemically important financial institutions, people usually think of banks, insurers or financial holding companies, but large technology firms (so-called BigTech) are increasingly part of this category. This paper examines regulatory approaches with which the systemic importance of BigTech firms in financial services could be addressed. According to the analysis, of the three regulatory frameworks identified in the literature (“restriction”, “segregation”, “inclusion”), when a balanced approach is used, the segregation of financial and non-financial activities seems to be the most promising regulatory solution, as this model works best for taking account of the practical aspects of operation, regulation and supervision.
Cite as (APA):
Bódi, R., Fáykiss, P., & Nyikes, Á. (2023). The Systemic Risks and Regulation of BigTech – "Too Big(Tech) to Fail?". Financial and Economic Review, 22(1), 5–20. https://doi.org/10.33893/FER.22.1.5
Column:
Our Vision (Essay)
Journal of Economic Literature (JEL) codes:
G18, G21, G23, G28, L41, L51
Keywords:
BigTech, FinTech, systemic risk, financial stability, financial regulation
References:
Adrian, T. (2021): BigTech in Financial Services [Speech, June 2021]. European Parliament FinTech Working Group. https://www.imf.org/en/News/Articles/2021/06/16/sp061721-bigtech-in-financial-services. Downloaded: 15 February 2023.
Arner, D.W. – Barberis, J.N. – Buckley, R.P. (2016): The evolution of FinTech: A new postcrisis paradigm? UNSW Law Research Paper, No. 62. https://doi.org/10.2139/ssrn.2676553
BIS (2019): Big tech in finance: opportunities and risks, Annual Economic Report 2019, Bank for International Settlements, June. https://www.bis.org/publ/arpdf/ar2019e3.pdf
Borio, C. – Claessens, S. – Tarashev, N. (2022): Entity-based vs activity-based regulation: a framework and applications to traditional financial firms and big techs, FSI Occasional Papers, No 19, August. https://www.bis.org/fsi/fsipapers19.pdf
CB Insight (2021): Visualizing Tech Giants’ Billion-Dollar Acquisitions. https://www.cbinsights.com/research/tech-giants-billion-dollar-acquisitions-infographic/. Downloaded: 20 January 2023.
Crisanto, J.C. – Ehrentraud, J. – Lawson, A. – Restoy, F. (2021): Big tech regulation: what is going on? FSI Insights on policy implementation, No 36, September. https://www.bis.org/fsi/publ/insights36.pdf
Ehrentraud, J. – Evans, J. – Monteil, A. – Restoy, F. (2022): Big tech regulation: in search of a new framework. FSI Occasional Papers, No 20, October. https://www.bis.org/fsi/fsipapers20.pdf
ESMA (2020): BigTech – implications for the financial sector. ESMA Report on Trends, Risks and Vulnerabilities No. 1, European Securities and Markets Authority. https://www.esma.europa.eu/sites/default/files/trv_2020_1-bigtech_implications_for_the_financial_sector.pdf
EBA (2022): Final Report on response to the non-bank lending request from the CfA on digital finance. European Banking Authority, 8 April. https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2022/1032199/Report on response to the non-bank lending request from the CfA on Digital Finance.pdf
EC (2021): Request to EBA, EIOPA and ESMA for technical advice on digital finance and related issues. European Commission, 2 February. https://commission.europa.eu/system/files/2021-02/210202-call-advice-esas-digital-finance_en.pdf
Fáykiss, P. – Papp, D. – Sajtos, P. – Tőrös, Á. (2018): Regulatory Tools to Encourage FinTech Innovations: The Innovation Hub and Regulatory Sandbox in International Practice. Financial and Economic Review, 17(2): 43–67. http://doi.org/10.25201/FER.17.2.4367
FSB (2017): Financial Stability Implications from FinTech: Supervisory and Regulatory Issues that Merit Authorities’ Attention. Financial Stability Board, 27 June. https://www.fsb.org/wp-content/uploads/R270617.pdf
FSB (2019): BigTech in finance: Market developments and potential financial stability implications. Financial Stability Board, December. https://www.fsb.org/wp-content/uploads/P091219-1.pdf
Frost, J. – Gambacorta, L. – Huang, Y. – Song Shin, H. – Zbinden, P. (2019): BigTech and the changing structure of financial intermediation. Economic Policy, 34(100): 761–799. https://doi.org/10.1093/epolic/eiaa003
MNB (2022): FinTech and Digitalisation Report. Magyar Nemzeti Bank, June. https://www.mnb.hu/letoltes/mnb-fintech-and-digitalisation-report-2022-final.pdf
Müller, J. – Kerényi, Á. (2021): Searching for a Way Out of the Labyrinth of Digital Financial Innovations – The Trap of Regulatory Challenges in the Digital Financial System. Financial and Economic Review, 20(1): 103–126. http://doi.org/10.33893/FER.20.1.103126
Padilla J. – de la Mano, M. (2019): Big tech banking. Journal of Competition Law and Economics, 14(4): 494–526. https://doi.org/10.1093/joclec/nhz003
Restoy, F. (2021): Fintech regulation: how to achieve a level playing field. FSI Occasional Papers, No 17, February. https://www.bis.org/fsi/fsipapers17.pdf
Statista (2022): Chart: Amazon, Microsoft & Google Dominate Cloud Market. https://www.statista.com/chart/18819/worldwide-market-share-of-leading-cloud-infrastructure-service-providers/. Downloaded: 20 January 2023.