Taken together, the entry of BigTechs at both ends of the financial services value chain may pose risks to financial stability that are more prominent than those from FinTech firms. The increase in the scale and pace of innovation also demands innovation from regulators and supervisors. Most of all, it calls on us to broaden our perspectives.
Successes were common but so too were unintended side-effects: In 1934 the Federal Reserve gained the authority to set margin requirements to counter increases in stock-market credit by curbing bank loans to stock brokers. By 1974, non-bank lending and derivatives had become so abundant as a compensatory source of credit that the Federal Reserve decided the policy tool was no longer effective.