Global finance wonks worry financial services too invested in outsourcers, Big Tech
Not keen on crypto, either – and looking forward to consistent language on cyber incidents
Finance ministers from the G20 bloc have put their names to a document that expresses concern financial services industries have become worryingly reliant on Big Tech, and their resilience could suffer as a result.
The document [PDF] is titled "G20 Chair's Summary and Outcome Document" and summarizes the proceedings of the First G20 Finance Ministers and Central Bank Governors Meeting, held in India last week.
The mention of Big Tech was made in the context of the Financial Stability Board's annual statement of work priorities from Klaas Knot, chair of the Financial Stability Board – an international body that recommends improvements to the world's financial systems.
Klaas's work statement promised that 2023 would see the board deliver "a consultative document to the G20 aimed at strengthening financial institutions' ability to manage third-party and outsourcing risk. This will include expectations for financial authorities' oversight of financial institutions' reliance on critical service providers, including Big Tech and fintech firms."
The FSB has pondered that dependence for a while: in March 2022 it flagged [PDF] that the COVID-19 pandemic had been especially good for Big Tech's financial services businesses and noting that the extent of those activities is hard to define.
The board also expressed concern about "negative financial stability implications from dependence on a limited number of Big Tech and fintech providers in some markets, the complexity and opacity of their partnership activities, and potential incentives for risk taking by incumbent financial institutions to preserve profitability."
Misuse of personal data was another possible downside of Big Tech's involvement in finance, while the board also identified the likes of Amazon and Google as potentially creating weak points in the financial system, as follows:
Cloud computing by third-party service providers not subject, in many cases, to financial regulation can introduce cost efficiencies and access to innovations in artificial intelligence (AI). But the limited number of providers of cloud services could magnify the impact of any operational vulnerability.
The document issued by the G20 Finance Ministers and Central Bank Governors Meeting is clearly aware of the FSB's interest in Big Tech, as it states: "To address the challenges over the operational resilience of financial institutions arising from their growing reliance on critical technology service providers, including Big Tech and fintech providers, in the financial sector, we look forward to the FSB's Consultative Report on strengthening financial institutions' ability to manage third-party risks and outsourcing, and financial authorities' oversight of third-party risks."
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Grab some popcorn once that document comes out.
And maybe make it a double feature, because the G20 document also states that the G20 awaits reports from the FSB, International Monetary Fund and the Organisation for Economic Co-operation and Development on how best to regulate crypto-assets.
Another item on the G20's to-do list is achieving "greater convergence in cyber incident reporting and coordination of relevant definitions and terminologies" so that market players understand what's reportable and use language that lets other stakeholders understand more about what's going on, and the risk posed. ®