The chief executive of UBS believes banking regulations should be expanded to financial technology firms that operate in the same space.
Speaking at this year’s Sibos convention in Geneva, Sergio Emotti, group CEO of the Swiss bank, said that he is fascinated by the benefits technology can bring to the banking industry. However, for new entrants that are competing with banks they should not be free from regulation.
“We are facing new entrants that are fracturing the banking business that don’t have the same regulation. It is good as it creates innovation, but regulators won’t address it until something negative happens,” said Emotti.
“We welcome new entrants as it brings enhanced competition, but if you are performing similar functions as the banks, then you have to join the party.”
The UBS chief also recognised the benefits new FinTech entrants will bring over banks that generally have older, less flexibility legacy systems. Without adapting to new technological changes, Emotti said costs at the back-end will pile up.
“The truth of the matter is that a big chunk of the cost in banking is the back end because we have legacy systems that are not able to keep up with complexity of new regulations and amount of transactions,” he added.
“Our bank is a big user of technology, but we need to define our contribution to the value chain. Our contribution is to make our processes efficient and effective to unlock value to shareholders and pay for cost of capital.
“Because of new entrants you have to pay attention to your top line and compete on pricing.”
UBS has invested heavily in keeping up with new FinTech entrants with its own Innovation Laboratory to crack blockchain and other emerging technologies.
Ginni Rometty, chairman, president and CEO of IBM, who spoke alongside Emotti, also highlighted the revolutionary impact blockchain will have on the industry within five years time, as long as global standards for the technology emerge,
“Blockchain will do for transactions what the internet did for information. If there wasn’t a global shared standard it would be hard to develop this. It is the fasting growing project,” Rometty said.