European financial regulators are discussing whether to supervise big technology companies more closely in response to recent moves into financial services by groups such as Amazon and Google, according to one of Europe’s most senior central bankers.
Olli Rehn, governor of Finland’s central bank and a member of the European Central Bank’s governing council, said the issue of big tech’s encroachment into the financial sector had prompted “a very lively discussion by financial supervisors and central banks in Europe”.
His comments on Sunday at the Financial Times Middle East Banking Forum in Dubai will be welcomed by many senior bankers who have been complaining about the uneven playing field as they worry about competing head-on with big tech groups.
They could also signal a new front in the tussle between European authorities and US tech groups, which are already being subjected to intense scrutiny by EU competition authorities and moves to extract more tax from their European operations.
When asked whether the ECB was considering regulating big tech groups that have moved into financial services, Mr Rehn said: “We see big tech is moving in there,” adding that it was “currently a matter for discussion among financial supervisors”.
The Finnish central banker, who was previously vice-president of the EU commission with responsibility for economic and monetary affairs, also warned that banks would have to overhaul their balance sheets to adjust for the risks of climate change.
Describing climate change as “the biggest market failure of all time” he said banks would have to take account of factors such as rising sea levels, extreme weather events, changing rainfall patterns and mass migrations in assessing the risks on their balance sheets.
“For a banker or any financial institution, climate change poses physical risks, such as extreme weather . . . and the debt servicing ability of a borrower or their credit quality may be affected,” he said.
But Mr Rehn’s comments on the potential for regulating big tech groups are likely to grab most attention in the banking sector.
The introduction this year of “open banking” regulation, forcing EU lenders to provide access to accounts of customers who authorise it, has left many top bankers worrying that large US and Chinese tech groups will cherry-pick the best parts of their business while escaping the burden of regulation.
Big US tech companies such as Amazon, Google, Facebook and Apple have been expanding into payments and other financial services. Chinese tech groups Alibaba and Tencent have already taken a dominant share of their country’s retail payments market.
Financial regulators on both sides of the Atlantic have already turned their attention to the cloud, as concerns mount over how to supervise online storage services, which hold information from the world’s biggest banks. Cloud services are used by banks to store customer-account data and their banking systems on servers hosted by big tech groups.
As well as cyber risk, regulators are worried about concentrating so much information in the hands of Amazon, Google and Microsoft — the three big companies that dominate cloud provision — without the same level of supervisory oversight as banks.
The Bank of England is considering whether to test banks’ resilience, analysing what would happen if access to the cloud were disrupted. The BoE’s Prudential Regulation Authority is also expected to publish more detailed thinking on the subject as a prelude to possible regulation.
Meanwhile in the US, the Office of the Comptroller of the Currency is reviewing banks’ relationships with third-party vendors, including cloud providers. EU watchdogs have also had discussions with tech groups and asked to see commercial agreements with banks