The Bank for International Settlements (BIS) is launching an innovation hub to encourage collaboration between central banks on meeting the regulatory and systemic challenges posed by the growth in financial technology.

The Basel-based institution, which promotes joint working between the world’s central banks, said the hub - which will be based initially in Basel, Hong Kong and Singapore - will identify and develop insights into critical trends in technology affecting central banking.

It will also develop public goods in the technology space geared towards improving the global financial system and serve as a focal point for a network of central bank experts on innovation, the BIS said.

The move comes just weeks after social media giant Facebook announced its own foray into financial services with its digital currency Libra, due to go live in 2020. The hub will also be seen as a co-ordinated move from central bank to respond to the rise of digital banking and FinTech firms.

Last week the BIS urged governments and regulators should act to ensure the entry of BigTech firms into financial services would not pose risks to financial stability, competition and data protection.

The set-up and ongoing work of the hubs will be carried out in collaboration and with the support of the host central banks: the Swiss National Bank, Hong Kong Monetary Authority, and Monetary Authority of Singapore. Additional Hub Centres across the Americas and Europe will be added as part of a second phase of implementation, the BIS said.

Mark Carney, governor of the Bank of England and chair of the BIS economic consultative committee said: "There is a new economy emerging driven by changes in technology, demographics and the environment.

“While the private sector is driving these innovations, their efforts will be more effective if the hard and soft infrastructure of the global financial system support this innovation, promote resilience and level the playing field on which to compete.”

Jens Weidmann, chairman of the BIS board of directors, said: "The IT revolution knows no borders and therefore has repercussions in multiple locations simultaneously.

“The establishment of the BIS Innovation Hub will enable central banks to extend their existing collaboration with a view to identifying relevant trends in technology, supporting these developments where this is consistent with their mandate, and keeping abreast of regulatory requirements with the objective of safeguarding financial stability.”

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