Asia Pacific Financial Regulatory Update Q4 2023

As we enter 2024, key thematics from the prior year remain relevant and top of mind for both Financial Services (FS) industry participants and regulators across the Asia Pacific (AP) region. While interest rate increases and inflation have cooled, a level of economic uncertainty remains, and this has been reflected in recent regulatory and supervisory priorities for the FS industry.

Implications of the global banking turmoil continue to be observed through regulatory and supervisory focus areas for the FS industry across the AP region. In Australia, the Prudential Regulator (APRA) has reflected this through both a series of updates and consultation on its financial risk management policy framework; and further emphasised through both APRA and the Australian Securities and Investments Commission (ASIC) supervisory and enforcement priorities for the coming year. Similarly, Bank Negara Malaysia (BNM) has published Operational Risk and Central Counterparty Exposure components and revisions to its Capital Adequacy Framework in line with Basel III standards. More broadly across the region, measures to strengthen capital and liquidity frameworks have also been implemented across Indonesia, Taiwan and the Philippines.

Regulation of digital assets and evolving payment platforms also continues to develop across the AP region. The increasing prevalence of digital innovation, particularly against a background of global uncertainty has seen to the retention of digital and cyber risk management as a key regulatory priority. The Monetary Authority of Singapore (MAS) has finalised regulations for Digital Payment Token service providers, and introduced a series of initiatives focused on the innovative use of digital currencies including wholesale central bank digital currencies (CBDCs), tokenised bank liabilities and regulated stablecoins. Bank Indonesia has also introduced three new services to its national, real-time retail payment system – BI-Fast, as a means to further strengthen the development of an integrated, interoperable and interconnected digital financial economy.

Significant breakthroughs in the development of Artificial Intelligence (AI) have also been observed within the AP region in the last 12 months. This surge in activity and popularity across FS industry participants has also been closely matched by regulators. Across the region, we continue to see the introduction and consultation on risk frameworks for the responsible and safe adoption of AI. In Australia, an interim response to a recent AI consultation highlighted risks in newer and more powerful AI models, emphasising the need for ongoing review and iteration of frameworks to respond to new and emerging risks. Across Singapore and Taiwan, initial developments are still being made in frameworks and principles for the responsible use of AI, highlighting the differing pace of progress across the AP region.

Despite continued challenges and uncertainties, the AP region enters the new year with steady recovery in the economy. Nonetheless, maintaining sight and focus of proactive risk management practices will support overall resiliency in the FS industry.

For queries or more information on these updates or other regulatory topics, please get in touch.