Reliance on big tech has major impact on financial sector
The Dutch Authority for the Financial Markets (AFM) observes that developments in digitalisation, sustainability and internationalisation are accelerating and having a growing impact on the financial sector. To absorb these developments, the financial sector will need to adapt, and policymakers and supervisory authorities will need to take action where necessary. Domestically, the pension transition remains an obvious notable development. The Dutch Authority for the Financial Markets (AFM) is publishing an overview of its priorities and other supervisory activities for the coming year today in its annual supervisory agenda. The AFM Agenda 2025 is based in part on the trends and risks set out in the AFM Trend Monitor 2025.
In short
• AFM Agenda 2025 sets out the supervisory priorities in the coming year
• Reliance on big tech has major impact on financial sector
• Geopolitical tensions are straining international relations
Reliance on big tech has major impact on financial sector
Technology is playing an increasingly indispensable role in the business operations and business models of financial institutions. The dominance in the technology sector of a small group of large, US tech companies (‘big tech’) could potentially have a major impact on the financial sector.With the digitalisation of the financial sector, the dependency on IT systems coupled with the importance and use of data are also increasing. The failure of one crucial party in the chain can bring services to a standstill for a large part of the sector. Major cyber risks can cause substantial financial damage and even threaten financial stability. This affects consumers as well as financial institutions.
Laura van Geest, Chair of the Executive Board of the AFM: 'The financial sector is becoming increasingly data and IT-driven. This trend needs to be matched with effective supervision. Data-driven supervision is therefore essential for the AFM to continue to fulfil its role as a risk-based supervisor into the future.'
Geopolitical tensions are straining international relations
Geopolitical tensions have increased fragmentation between trading blocs, exacerbated by reciprocal import tariffs and financial and economic sanctions between the EU, the US and China. In response, many countries are striving for strategic autonomy in sectors such as defence, technology and energy. Meanwhile, political developments are causing additional uncertainty worldwide. Future policy changes in the US and the EU, for instance, could increase regulatory divergence between the US and the EU, for example around sustainability or crypto-assets. This could lead to regulatory and supervisory arbitrage and might undermine the integrity of financial markets.Contact for this article
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