ICBA: Nonbank payments firms benefit from regulatory imbalance

ICBA said it agrees with a Financial Stability Board report that nonbank service providers involved in cross-border payments are not subject to the same regulatory scrutiny as banks.

Background: The FSB’s consultation report is the latest step in its work to fulfill a G20 directive to improve the speed, efficiency, transparency, and cost of cross-border payments by 2027.

The Report:

• Outlines the significant regulatory, supervisory, and oversight gaps between bank and nonbank providers engaged in the same activities.

• Proposes five principles and six recommendations for policymakers to adopt to bridge this gap.

• Introduces the idea of creating an international standard for the regulation, supervision and oversight of nonbank cross-border entities, similar to the Basel framework for bank regulation.

ICBA Response: In a letter to the FSB, ICBA said it:

• Agrees that nonbank regulation has not kept pace with the pace of technological development.

• Respects the five guiding principles established in the FSB document to begin closing the gap between banks and nonbanks.

• Has concerns with comments in the report suggesting that nonbanks are the only ones capable of creating innovative cross-border payment solutions.

• Strongly opposes any effort to allow nonbanks access to the payments system and settlement accounts with the Federal Reserve.

• Calls on the FSB to clearly recognize that individual nations retain the authority to determine which parties may interact directly with their payment systems and central bank settlement accounts.

Previous Comments: ICBA and other groups earlier this year said a global panel’s framework for ISO 20022 harmonization requirements—which is part of the same G20 initiative—presents challenges and requires community bank representation in ongoing discussions. In a comment letter last year, ICBA said policy setters should ensure the ISO 20022 plan does not lead to more complexities for community banks.