AI and fintech fragmentation on FSB European group’s agenda

At a recent meeting in Bucharest, the Financial Stability Board (FSB) Regional Consultative Group (RCG) considered implications of the growing use of artificial intelligence, machine learning and big data for the regulation and supervision of the financial system. Recognising that these innovations are important drivers of change for the financial industry, members explored risks and opportunities that these innovations could entail for financial stability.

Members of the RCG then discussed global and regional financial vulnerabilities and their potential impact on European economies. While financial markets have functioned robustly during the period of volatility in late 2018 and near-term conditions in emerging markets have stabilized, members highlighted potential financial stability risks against the backdrop of rising debt levels, the weakening of lending standards in some markets, and continued global political uncertainty. The group also exchanged views on possible policy responses, including assessments of potential vulnerabilities linked to high global indebtedness and more specifically to the markets for leveraged loans and collateralized loan obligations (CLOs). The meeting considered the steps authorities are taking to address identified risks.

The group received an update on the FSB’s work programme and the deliverables to the June G20 meetings in Japan. The FSB’s work programme in 2019 is focused on new and emerging vulnerabilities, including potential financial stability issues arising from market fragmentation and from fintech, and how they may be addressed; finalising and operationalising post-crisis reforms; evaluating the effects of the reforms on, for example, financing to small and medium-sized enterprises; and correspondent banking.

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