Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
Financial industry could take a hit from central bank digital currencies, lobby group warns
24 Feb 2020 12:00 am by Fiona Maxwell
Banks' ability to lend could be seriously hit if central banks develop digital currencies without industry involvement, a lobby group has warned EU financial services commissioner Valdis Dombrovskis.
In a letter seen by MLex, the Institute of International Finance has called for “close consultation” with the industry on the design of central bank digital currencies, which are starting to be discussed at an international level. Without this, banks may see an impact on their operations, said the association, which represents the global finance industry.
“It is important to understand how different design considerations could fundamentally alter the ability of commercial banks to gather deposits and extend credit,” IIF President Timothy Adams said in the letter to Dombrovskis, sent last week.
In January, six of the world’s biggest central banks announced the creation of a group to discuss introducing digital currencies in their home jurisdictions.
A central bank digital currency would be an electronic form of fiat money with the status of legal tender and ability to compete with commercial banks' operational model of deposit taking and loan issuing.
The central banks' move appeared to be their response to a private-industry virtual currency initiative, the Facebook-led Libra project. The planned "stablecoin" — a cryptocurrency backed by fiat money to limit volatility — has been criticized by regulators over its potential for money laundering and other regulatory and oversight concerns.
In its letter, the IIF called on the European Commission to support the financial services industry in the necessary investment for a digital transformation of the sector, via a regulatory framework that applies rules to risks and activities rather than to specific institutions.
The industry has been aggrieved for some time that Big Tech companies such as Google and Amazon are not subject to the same financial regulations despite offering similar services via financial technology.
The IIF also said it wants to engage with European regulatory bodies on developing operational resilience rules. While the UK has undertaken the most substantial work in this area so far, the EU should seek “to play an active role in the formulation of new supervisory approaches to operational resilience maturity that are in close coordination with global approaches so as to avoid fragmentation on what is a cross-border issue,” it said in the letter.
The increase in the number, scope and sophistication of cyberattacks means managing such risks is a shared priority for the public and private sector, the IIF noted. As risks continue to develop, policymakers should formulate risk-based approaches that make it easier for the two to work together to address cyber-incidents and prevent them from spreading into the overall system, the association said.
Additionally, the IIF called on Dombrovskis to aim for a risk-sensitive implementation of the globally agreed banking standards known as Basel III. The final rules should reflect the characteristics of the European financial sector “with a view to avoid undue impact of the Basel III framework,” the letter said.
25 Jan 2021 12:00 am by Richard VanderfordIn US anticorruption enforcement, a new administration means new bosses at the US Justice Department. New policies, probably not so much...
05 Jan 2021 12:00 am by Robert ThomasonProposed US cryptocurrency regulations for virtual currencies has generated comments from users who say they're impractical and an assault on their rights.
Canada’s export credit agency, provided a credit facility of up to $135 million to help finance a deal where Bombardier allegedly paid bribes to win business in Indonesia.