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Blockchain to have mixed implication on banking system:Moody's

Press Trust of India  |  Mumbai 

technology has the potential reduce costs of cross-border transactions for banks. However, it could put pressure on their fees and commissions, which is a credit negative, says a report.

Global rating agency in its report 'Banking: global efficiencies could streamline transactions but reduce banks' fee income', said disruption to have mixed credit implications for global systems.

Besides, reduction in cost, can decrease time involved in cross-border transactions.

"While making cross-border transactions faster and less expensive would be credit positive for banks, these efficiencies could also compress their fees and commissions, a credit negative," the rating agency said.

It's (credit strategy), Colin Ellis, said, blockchain has the potential to substantially change how a wide range of are executed.

"But the adoption of these technologies will also limit processing fees, commissions and gains on foreign exchange transactions, which will pressure revenue," Ellis said.

Swiss banks would be most exposed to reductions in fees and commission, with 50 per cent of their revenue coming from that source.

Italian, Canadian, and Israeli banks follow at around 35 per cent.

Meanwhile, banks in Asia Pacific, as well as some smaller European periphery countries, are relatively less prone to relying on fees and commissions in generating total revenue.

systems with significant cross-border transactions, including those in the United Kingdom, and Switzerland, may see the most disruption from the technology that underpins crypto-currencies such as bitcoin, it said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, April 17 2018. 16:55 IST