Big Tech Firms Pose Global Financial Stability Risks: FSB Report

Technology giants are bringing digital financial services to more people in the world than ever, but the authorities should be watchful for anti-competitive practices and unfair advantage over traditional systems, the Financial Stability Board said in a report on Sunday.

The FSB is an international body comprising of Group of Twenty, or G20, countries, and the European Union that acts as a watchdog for the global financial system.

'Big Tech' Grabbing The Financial Market

The financial services arms of “Big Tech” companies like Microsoft Corporation MSFT, Amazon.com Inc MSFT, Apple Inc AAPL, Alphabet Inc GOOGL, Facebook Inc FB, and eBay Inc EBAY already have market capitalizations as large as traditional banks like JPMorgan & Chase Co JPM and Bank of America Corporation BAC, the FSB noted.

By increasing their rural outreach, Chinese tech giants like Alibaba Group Holding Ltd BABA, Tencent Holdings Ltd TCEHY and Baidu Inc BIDU are also catching up to the country’s largest bank, the Industrial and Commercial Bank of China IDCBF, according to the report.

A Risk To 'Financial Stability' 

The FSB said that the Big Tech firms pose an imminent risk to global “financial stability,” unless the authorities monitor and intervene to make things right.

“These include financial risks that stem from leverage, maturity transformation and liquidity mismatches, as well as operational risks including those that might arise from potential shortcomings in governance, risk and process controls,” the FSB said in its report.

“The competition from [Big Tech] firms might reduce the resilience of financial institutions, either by affecting their profitability or by reducing the stability of their funding,” the report said.

Big Tech May Need to Share Their Data

To ensure fair market competition, the Big Tech firms should be required to share customer data with new entrants, in a similar manner as traditional banks are, the FSB suggested.

“Doing so may help encourage competition and help ensure a level playing field amongst market participants. Financial authorities may also benefit from close engagement with other regulatory agencies,” the FSB said.