23 March 2018
The Joint Committee of the European Supervisory Authorities (ESAs) published the report, Joint Committee Final Report on Big Data (Report) and the companion fact sheet, Use of Big Data by financial institutions (Fact Sheet). The Report analyses the effect of Big Data on consumers and financial firms. The ESAs (European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA)) based their Report from the results of a consultation conducted between December 2016 and March 2017.
The role of the ESAs is to monitor emerging risks to consumers and financial institutions. As part of that role, the ESAs have observed the progressive increase in the use of Big Data across the banking, insurance, and securities sectors and across different European Union (EU) Member States. The Joint Committee issued a Discussion Paper on Big Data and asked for stakeholder input. The Report is the result of this consultation.
The objectives of the consultation and the Report were to:
Big Data, according to the Report, benefits the financial industry and consumers in a number of ways, for example, by permitting the use of more tailored products and services, improved fraud analytics, and enhanced efficiency of organisational internal procedures.
Big Data also poses risks, including, among others, the potential for errors in Big Data tools, leading to incorrect decisions being taken by financial service providers. Another risk is the potential for increasing the level of segmentation of customers, which could influence the access and availability of certain financial services or products.
The consultation found that while the development of Big Data poses potential risks to financial services consumers, the benefits outweigh the risks at the present time. Based on the evaluation of both the benefits and risks associated with Big Data, the ESAs concluded overall that legislative intervention at this point would be premature. The ESAs believe that existing EU legislation should mitigate many of the identified risks. The ESAs will continue to monitor any developments in this area in the coming years and invite financial firms to develop and implement good practices on the use of Big Data.
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