Market: Digitalization of the banking sector creates new risks, according to the Basel Committee

by Huw Jones

LONDON (Reuters) – Digitalization and the arrival of big technology companies in the finance sector are creating new vulnerabilities and increasing risks already present in the financial system, according to a report published on Thursday by the Basel Committee, which regulates the banking sector.

The development of cloud computing, which makes certain essential banking services dependent on external service providers, the emergence of artificial intelligence (AI), blockchain, as well as the rise of ” open banking”, which consists of fintechs sharing their customers’ data with banks, raises new risks, declared the Basel Committee.

Among these, “greater reputational and strategic risks, more factors that could test the operational resilience of banks, and potential systemic risks linked to increased interconnections,” details the report.

“When necessary, it will be necessary to consider the relevance of new standards to mitigate risks and vulnerabilities,” added the Basel Committee.

On Wednesday, the European Central Bank warned that the use of AI in finance could require new rules.

The Basel Committee is made up of central bankers and financial regulators from the 27 countries who put into practice the rules decided within it.

(Huw Jones report, French version Corentin Chappron, edited by Blandine Hénault)

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