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Global | Implementing the principle of "same activity, same risk, same regulation"

Published on Thursday, October 14, 2021 | Updated on Friday, October 15, 2021

Global | Implementing the principle of "same activity, same risk, same regulation"

The principle of “same activity, same risk, same regulation” is key to achieve a level playing field for all providers of financial services. This Economic Watch analyses this principle, with a focus on the “same risk” element, and explores proposals on how to put it into practice.

Key points

  • Key points:
  • The principle of “same activity, same risk, same regulation” is key in the new competitive landscape in the financial sector, characterized by the presence of banks and new entrants (fintechs and bigtechs).
  • This principle is often associated with the need to move from an entity- to an activity-based approach to financial regulation, which would mean imposing similar requirements upon all active players in a particular market segment, regardless of the legal nature of those entities.
  • The “same risk” element of the principle means that there are limits to a pure activity-based approach, since the provision of the “same activity” can sometimes lead to different risks depending on certain factors such as the scale at which the activity is provided, whether the service is provided end-to-end by a single player and whether the activity is offered in combination with other regulated or non regulated activities.
  • The principle of “same activity, same risk, same regulation and supervision” can be put into practice through a combination of activity and entity-based approaches, to respond to the challenges of new developments in finance.

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