LONDON (Reuters) – Regulators have little understanding of risks from banks setting up digital marketplaces and need a framework for spotting potential contagion if things go wrong, the European Union’s banking watchdog said on Tuesday.

The concept of platformisation means that banks create a digital market place for their services and products. It is part of wider digitization of finance, which has increased since the Pandemic.

It said that relying on digital platforms for distribution and marketing of services can lead to new financial, operational, and reputational interdependencies.

Although new legislation is not required at the moment, this trend poses “some challenges” to regulators when it comes to monitoring market developments as well as any interdependencies.

EBA noted that it appeared the majority of relevant authorities have limited knowledge of platform-based model business models.