Ahead of Brexit, the Bank of England is set to open doors to new payment firms and tech companies such as Facebook by enabling them access to its £500bn balance sheet.
The move is expected to strengthen the British fintech sector, which is expected to face tougher competition from Europe after its impending exit from the European Union, reported Reuters.
According to Bank of England Governor Mark Carney, consultations will take place in 2020 in this connection, which means new payment providers will get same opportunities like commercial banks in accessing its balance sheet.
Carney, during a speech at the Lord Mayor’s Banquet for Bankers and Merchants in London, said that competitors will get access to the same resources as incumbents and at the same time will hold the same risks to the same standards.
Historically, only commercial banks were allowed to hold interest-bearing deposits or reserves at the UK’s central bank. However, with new payment providers and systems emerging, Carney believes that access to the Bank of England’s core infrastructure should change and that is appropriate to see if they can also hold funds overnight on its balance sheet.
If the proposal is approved, then it would make Bank of England the first of its kind in the world to allow non-banks such access while paving way for Amazon, Apple and other tech giants to expand into the payments sector.
Carney said: “From the Bank’s perspective, expanding access can improve the transmission of monetary policy and increase competition. It can also support financial stability by allowing settlement in the ultimate risk free asset, and reducing reliance on major banks.
“Users should benefit from the reduced costs and increased certainty that comes with banking at the central bank. From the perspectives of UK households and businesses, wider access can improve inclusion and services.”
The bank’s governor also revealed that Facebook’s new cryptocurrency Libra will be approached with an open mind but will not be shown an open door. Carney said that the terms of engagement for Libra and other innovations should be adopted in advance of any launch.
He said that Libra will have to adhere to the highest standards of prudential regulation and consumer protection and should address issues such as anti-money laundering, data protection, and operational resilience.