Digital transformation of the banking system in the context of sustainable development
| DOI | https://doi.org/10.1108/JMLC-02-2021-0011 |
| Published date | 14 June 2021 |
| Date | 14 June 2021 |
| Pages | 165-180 |
| Author | Imeda A. Tsindeliani,Maxim M. Proshunin,Tatyana D. Sadovskaya,Zhanna G. Popkova,Mariam A. Davydova,Oksana A. Babayan |
Digital transformation of the
banking system in the context
of sustainable development
Imeda A. Tsindeliani,Maxim M. Proshunin and
Tatyana D. Sadovskaya
Russian State University of Justice, Moskva, Russian Federation
Zhanna G. Popkova
Russian State University of Justice (Volga Branch),
Nizhny Novgorod, Russian Federation, and
Mariam A. Davydova and Oksana A. Babayan
Russian State University of Justice, Moskva, Russian Federation
Abstract
Purpose –The purpose of this paper is to study the current state of the Russian banking system in the
context of digital economy development, to establish and identify the benchmarks and needs of legal
regulation, to study the potential possibilities of digitalization of relations in the banking sector in the
mechanismof implementing prudential rules.
Design/methodology/approach –Using the method of political and legal analysis used in this study,
the legal guidelines for the digitalization of the bankingsector and the financial services market have been
determined,which in the Russian legal system are strategic planning documents.
Findings –International research in the field of banking indicates that digitalization and globalization of
the economy stimulatethe processes of international regulatory cooperationand harmonization of legislation,
the use of new approaches in the development and adoption of regulations in the financial market. The
growth of digitalization of relations in the bankingsector will contribute to the effective implementation of
prudentialrules, including those related to the need to protectpublic interests.
Originality/value –The study revealed a number of issuesrelated to the digitalization of the activities of
credit institutions that are professional participants in the securities market and the central bank as a
financial mega-regulator,requiring a legal solution. Measures aimed at improving the currentlegislation and
proceduresof state regulation and supervision are proposed.
Keywords Banking regulation and supervision, Digital technologies, Financial services market,
Financial stability, Financial technology
Paper type Research paper
Introduction
The transition to a new stage of the industrial revolution encourages states to develop and
implement new policies that aim to transform many social institutions and processes. The
development of information technology has led to such a phenomenon as the “digital
economy”, a radical transformation of the financial sector, covering the activities of banks,
insurers and other financialorganizations.
The 2008 global financial crisis exposed systemic vulnerabilities in the banking system
that are unfavorable for the economy as a whole. In the aftermath of this peak financial
crisis, a number of regulatory initiatives have been initiated internationallyto change the
Transformation
of the banking
system
165
Journalof Money Laundering
Control
Vol.25 No. 1, 2022
pp. 165-180
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-02-2021-0011
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
rules governing the financial system and major institutions. Regulatory changes and de-
regulation are part of broader policies aimed at improving financial stability. The stability
of the banking system is integral to future growth and sustainability. The role of the
banking system in the economyand society as a whole is to ensure a stable and sustainable
economy (Ntarmah et al.,2019). Technological progress in the field of banking services, the
development of the financial technology industry have served as a powerful impetus for
financial systems to enhance their stability, adaptability to external influences, without
slowing down the processof structural transformations and the development of competition.
The pre-requisitesfor the stimulation and development of financial technologies werethe
following factors:
low margins of banking services;
transformation by financial market participants of their business models and the
desire to create ecosystems;
increasing the penetration of financial services because of their digitalization;
the loss by banks of the monopoly on the provision of traditional (payment and
other) services;
the acquisition by non-financial organizations of a significant role in the financial
market;
the imposition of quasi-state control functions on banks; and
banks’desire for partnerships with startups and tech companies.
Observed global trends indicate great potential for growth in the share of digital financial
services.
The purpose of this study of the current state of the banking system in the context of
economic digitalization is to establish and identify the benchmarks and needs of legal
regulation, to analyze the potential possibilities of digitalization of relations in the banking
sector in the mechanism of prudential rules implementation. The results of the study will
make it possible to identify a range of issues requiring a legal solution and propose
measures aimed at improving the current legislationand procedures of state regulation and
supervision.
Despite numerous scientific studies, there is no generally accepted approach to defining
the term “financial sustainability”in the academic literature. Most often, financial
sustainability is considered from the standpointof the ability of the banking system to
effectively resist negative factors of the external and internal environment and perform its
main functions –solvency, effective distribution, use and redistribution of financial flows
(Carson, 2003).
There is also no legal definition of financial stability. The term “financial stability”,
which is used by the World Bank, the International Monetary Fund and the European
Central Bank to characterize the stability of the financial system at the macro level, differs
significantly from the interpretation of financial stability as a characteristic of the financial
position of an organizationaccepted in the scientific literature (Puchkova et al.,2020).
Financial sustainabilitytoday should be a strategy for the developmentof banks and not
just their short-term achievement. The use of advanced financial technologies to promote
economic growth, the use of modern banking technologies, effective and rational
development of the banking system, ensuring economic stability, are necessary to
implement and maintain the sustainability of the banking sector (Shubbar and Girinskiy,
2019).
JMLC
25,1
166
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