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Financial regulations 13 Oct 2018

"Activities with the same risks need the same regulatory treatment"

José Manuel González-Páramo on Saturday took part in the annual meeting of the Institute for International Finance (IIF) in Bali held in parallel with the annual meetings of the IMF and the World Bank. He called for a regulatory framework that treats all market participants equally by establishing a level playing field: “Activities with the same risks should receive the same regulatory treatment” without unnecessary barriers to competition, he said.

The executive director, head of economics, regulation and public affairs at BBVA, pointed out that as barriers between sectors become blurred, regulators need to rethink sector regulations. This is patently clear in regulations that have to do with open banking.

These regulations introduce, for example, a new right to portability that allows consumers to share their data with third parties. In his opinion, regulations such as PSD2 and GDPR, although a step in the right direction, can create an imbalance in the regulation of data in that other sectors can access the data of banks but not the other way about. In line with recent remarks by BBVA CEO Carlos Torres Vila on the occasion of the IX Financial Meeting organized by Spanish financial daily Expansión and consultancy KPMG, he called for a level playing field for banking and other sectors.

But this regulatory framework, apart from avoiding imbalances, has to be harmonized across sectors and countries in order to be able to meet the challenges of the digital era. He reminded those present that currently the flexibility and dynamism needed to adapt to a changing environment as a result of the expansion of the digital economy is lacking.

From his point of view, global and transversal coordination in the design and implementation of this new regulatory framework for digital finances is required. González-Páramo pointed out that while the G20 has given a mandate to some authorities – such as IOSCO and the FSB – the reach of this mandate is limited and partial. In this sense he regards it essential to open an international debate on key issues that require coordinated actions such as crypto-currencies, data and cybersecurity.

On the occasion of the annual meetings of the IMF, the World Bank and the IIF in Bali, the executive chairman of the BBVA Group, Francisco González called for “a new legal architecture to protect the consumer, spread the benefits of the digital revolution throughout society, drive innovation and ensure financial stability”.

Will banks survive in the digital world?

José Manuel González-Páramo declared himself to be a “techno-optimist”. He said in the context of the current disruption brought about by new technologies, there are two basic factors that will determine the speed of change: banks’ own capacity to transform themselves and the role of regulators and supervisors.

Banks, he said, have to adapt their strategies and take care of their most valuable asset: customer experience. Likewise, banks will have to regain their reputation and achieve better pricing and automated processes. They will also have to take on digital rivals – both fintechs as well as the tech giants. The BBVA executive board member believes it essential to establish collaboration ties with the new players. He gave as an example BBVA’s strategy, which is based on three pillars: acquisitions, investments through the Propel Ventures fund and an in-house incubator.

The IIF’s annual meeting gathered together representatives from the financial sector, public authorities, regulators and supervisors. José Manuel González-Páramo took part in the panel discussion ‘Regulating digital finance: Ensuring a level playing field’ along with Brad Carr, senior director in regulatory affairs and policy at the IIF, John Lee, Maybank CEO in Singapore, Bénédicte Nolens, senior director and head of risk and strategy of the Hong Kong Securities and Futures Commission and Huw van Steenis, advisor to the Bank of England.

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