IMF chief sounds alarm on ‘big data disruption’

International Monetary Fund (IMF) managing director Christine Lagarde speaks at a G20 high-level seminar on financial innovation entitled “Our Future in the Digital Age” on the sidelines of the G20 finance ministers and central bank governors meeting in Fukuoka on June 8, 2019. (AFP / POOL / Kiyoshi Ota)
Updated 09 June 2019

IMF chief sounds alarm on ‘big data disruption’

  • Fintech poses significant threat to global financial system, says Lagarde
  • Lagarde said China presents an example of the trade-off between benefits and challenges posed by financial technology

FUKUOKA, Japan: International Monetary Fund Managing Director Christine Lagarde warned on Saturday that the increasing presence of technology giants using big data and artificial intelligence could cause  significant disruption to the world’s financial system.

The rapid development of financial technology (fintech) has increased access to cheap payment and settlement systems for low-income households in emerging countries where traditional banking networks are scarce.

But it has raised concern about the increasing dominance of big technology firms in mobile payments, which could force global policymakers to rethink the way they regulate the banking system and ensure financial settlements are executed safely.

“A significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence,” Lagarde told a symposium on financial technology held on the sidelines of the G20 finance leaders’ meeting in Fukuoka, southern Japan.

While such innovation may help modernize financial markets, they could make the financial system vulnerable such as by putting payment and settlement systems under the control of a handful of technology giants, she added.

“This presents a unique systemic challenge to financial stability and efficiency, and one I hope we can touch on during the G20, and address in a cooperative and consistent fashion.”

Lagarde said China presents an example of the trade-off between benefits and challenges posed by financial technology.

“Over the last five years, technology growth in China has been extremely successful and allowed millions of new entrants to benefit from access to financial products and the creation of high-quality jobs,” she said. “However, it has also led to two firms controlling more than 90 percent of the mobile payments market.”

Addressing the pros and cons of financial innovation is among topics of debate at the two-day meeting of Group of 20 finance ministers and central bank heads that began on Saturday. 

Kuwaiti equities to be in main MSCI emerging markets index

Updated 1 min 25 sec ago

Kuwaiti equities to be in main MSCI emerging markets index

DUBAI: MSCI plans to upgrade Kuwaiti equities to its main emerging markets index in 2020, a move that could trigger billions of dollars of inflows from passive funds.
The index compiler will include the MSCI Kuwait index in the emerging market index in the May 2020 semi-annual index review.
MSCI, the world’s largest index provider, whose emerging-market group of indexes has about $1.8 trillion of assets tied to it, also said it would start a consultation on reclassifying the MSCI Iceland Index to Frontier Markets status. It said it would announce the results of this by Nov. 29.
Kuwait’s Market Development Project was implementing several regulatory and operational enhancements in the Kuwaiti equity market, said Sebastien Lieblich, global head of equity solutions and chairman of the MSCI Equity Index Committee.
MSCI expects Kuwait to introduce more reforms before the end of 2019, such as introducing omnibus accounts that would allow foreign investors to trade while remaining anonymous, offering the same privileges that local investors now have.
The Kuwaiti capital market regulator has announced plans for such facilities to be available to the wider market by November, Arqaam Capital said. “These enhancements have significantly increased the accessibility level of the Kuwaiti equity market for international institutional investors,” Lieblich said.
The Kuwaiti market has outperformed markets in the Middle East this year in anticipation of the MSCI move.
The benchmark premier index is up about 20 percent so far this year. It was down 0.5% in early trade on Wednesday.
“MSCI EM inclusion could represent the biggest ever liquidity event for Kuwait’s stock market,” said Salah Shamma, head of investment MENA at Franklin Templeton Emerging Markets Equity, adding that a 0.5 percent representation in the MSCI EM index could attract investor flows of about $10 billion.