Bank-Fintech Partnerships, Outsourcing Arrangements, and the Case for a Mentorship Regime

Fintech firms, once perceived as disruptors of the traditional banking industry, are now increasingly seen as attractive partners for established financial institutions. Partnership arrangements between banks and new financial technology startups have therefore mushroomed over the last several years. Such partnership agreements, which come in different forms and contexts, are usually advantageous for both sides: Banks may ordinarily suffer from legacy issues and cumbersome internal processes, and therefore benefit from fintech firms’ superior technology to develop new business ideas. At the same time, a bank’s broad customer base may allow a startup to benefit at an earlier stage from economies … Read more

How Europe Can Survive Without Introducing Sovereign Debt Limits

EU financial policymakers appear to be once more in a deadlock situation over proposals to limit the sovereign risk exposure of European banks. The strong exposure of some banks in the southern European periphery in their national sovereign’s debt was seen by many as one of the contributing factors to the ongoing sovereign debt crisis (Acharya et al. 2014, Beltratti & Stulz 2015; Brunnermeier et al. 2016). Powerful incentives have encouraged financial institutions to buy and hold government bonds in the past (Gros 2013). In fact, this was the intellectual background for the policy framework known as the Banking Union, … Read more