The Basel Committee has finalized proposed guidance laying out global standards to ensure safety and soundness as well as consumer protection as efforts are made to ensure that financial services reach those previously excluded from the savings and transaction services necessary for wealth accumulation and social stability. In general, Basel wants non-banks regulated for both prudential and consumer-protection purposes much like banks, with any partnership arrangements between banks and non-banks also subject to regulatory standards and supervision regardless of any out-sourced structures. Global regulators also want to wall off financial activities from commercial ones, a sharp departure from longstanding global (if not U.S.) practice, with deposit-taking and similar activities either limited to banks or allowed for non-banks only under stringent protections. Reflecting fears that these requirements could adversely affect innovation, Basel is open to “sandbox” concepts such as those advancing in the U.K., but it is also clearly wary of them and thus recommends numerous restrictions for all but the smallest start-ups entering wholly novel business activities.
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