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Fintechs Should Be Subject to Stress Tests, CFTC’s Behnam Says

Nov. 1, 2018, 1:17 AM

Financial technology companies should undergo stress testing to ensure that their products don’t misfire and cause harm to the broader financial system, a U.S. commodities regulator said.

Financial regulators should work with industry to test whether new products in areas such as distributed ledger technology and artificial intelligence meet “minimum standards of resiliency and stability,” CFTC Commissioner Rostin Behnam said in a Nov. 1 speech in Singapore.

The Commodity Futures Trading Commission and other regulators have a duty to understand how new financial technologies could go wrong in order to ensure “there are structures in place to absorb and buffer the shocks from a trader or technology failure,” he said in prepared remarks.

Behnam stressed that regulators shouldn’t go it alone.

“Successful supervision does not rest solely with the regulators. The FinTech and financial industries and other stakeholders should engage, exchange their ideas, explain what they are trying to achieve and how they intend to do it,” he said.

Behnam, one of two Democrats on the five-member CFTC, is on a 10-day trip to Asia. In an Oct. 25 speech in Tokyo, he called for fintech innovators to consider the risks their companies may introduce into the financial system, in addition to the benefits.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com