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Chairman of the IFRS Foundation Trustees speaks about Big Techs and financial stability

  • IFRS - IASB Image

Dec 06, 2019

On December 6, 2019, the International Accounting Standards Board (IASB) released a keynote speech given on December 3 in Paris, by Erkki Liikanen, Chairman of the IFRS Foundation Trustees, where he spoke on the question of whether big tech is a threat to financial stability.

Mr. Liikanen explained that today, a major push for innovation in global finance is coming from ‘big techs’, companies that are dominant platform providers that offer ubiquitous digital services. He summarized the impact of these big techs neutrally:

  1. The entry of big techs into financial services holds the promise of efficiency gains and can enhance financial inclusion.
  2. Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and business models.
  3. Big techs' entry presents new and complex trade-offs between financial stability, competition and data protection.

Based on this, Mr. Liikanen offered three observations. Firstly, policymakers need to decide how much to encourage big tech to enter finance — should policies promote big techs’ entry or restrict it? Secondly, big tech tests the regulatory perimeters of data protection, competition policy and now financial regulation. As such, regulation that is fit-for-purpose will require enhanced cooperation among multiple regulatory bodies. And thirdly, we need to recognize the cross-border nature of the big techs and fintechs challenge and respond appropriately. Mr. Liikanen also noted that among the initiatives in the field is the work by the IFRS Foundation to consider the accounting for crypto assets under IFRS standards.

Mr Liikanen closed his speech by noting: "Innovation is here to stay, and it will bring benefits and it will bring challenges. We need a balanced approach, where we reap the benefits of financial inclusion and efficiency and ensure a level playing field between big techs and banks."

Review the full speech on the IASB's website.

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