Time to disrupt yourselves
Deloitte 2017 Asia Pacific Financial Services Regulatory Outlook
15 December 2016: In order to succeed in 2017, financial services companies will need to disrupt themselves according to Deloitte's 2017 Asia Pacific Financial Services Regulatory Outlook report released today. As with preceding years, the 2017 regulatory outlook remains complex for financial services firms operating in Asia Pacific.
Kevin Nixon, Global & Asia-Pacific Leader, Centre for Regulatory Strategy, Deloitte explained that while the post-crisis period of prescriptive rule making is slowing, regulation will continue to evolve and drive change. “In 2017 the focus will turn to embedding reforms, intensifying supervision, continuous planning and testing, and dealing with emerging risks such as disruptive innovation and cybersecurity.
“This means the regulatory agenda will remain full in the coming years, and financial services firms operating in the Asia Pacific region will need to respond to the changing regulatory landscape in an agile way.”
Nixon said: "Recent political developments outside the region will also add a layer of uncertainty, particularly if there is a trend to dismantle efforts aimed at global harmonisation of regulation. Financial services firms will need to take decisive and, in some cases, bold actions in response to this current period of difficulty."
The Deloitte Asia Pacific Centre for Regulatory Strategy report outlines four major regulatory themes dominating the outlook for Asia Pacific financial services firms during 2017: resilience, governance, supervision and technology.
Since the financial crisis, much of the focus for regulators has been on ensuring the resilience of financial institutions and the financial system. This will continue into 2017, with a particular emphasis on domestic implementation. The ‘Basel IV’ rules for banks are due to be finalised by the end of 2016, with the first iteration of the global capital standards for insurers released in 2017, and the resilience of the asset management industry to be investigated.
Regulatory expectations around stress testing will also increase in 2017, with more intricate and diverse scenarios. Local regimes will further align with international standards on recovery and resolution planning. Organisations may need to devote significant energy and resources to meet new sets of rules and improve capabilities in these resilience building areas.
Recent examples of governance and conduct failings will mean that in 2017 there will be a sharpened regulatory focus on ensuring firms have robust governance frameworks throughout the entirety of their organisation, with a priority on organisational culture. Organisations should start reviewing existing governance frameworks and tackling practices that could signal problematic culture.
In 2017, Asia Pacific regulators will be moving beyond concern about compliance with explicit rules, adopting a more dynamic and forward looking supervisory approach that will involve continual engagement and requests for granular data on a greater variety of matters.
Firms will need to be in a position to clearly articulate their business strategy and may need to invest in advanced data and analytics technologies. They should also expect more intense engagement with regulators, involving ongoing discussion, reviews, testing, guidance and challenge at the highest levels, covering all aspects of the business.
Regulators will continue to nurture financial technology (FinTech) in 2017 and will investigate regulatory technology (RegTech) uses. In hand with this will be enhanced expectations around the strength of cybersecurity measures.
Organisations wishing to maintain a competitive edge will need to invest in innovative technology, retain ongoing engagement on RegTech and take an integrated cross-functional cyber resilience approach. Technological innovations, while posing a threat to the established way of doing things, will also provide firms with the best ways to manage the range of stresses arising from the regulatory expectations explored in the report.
Nixon said: "Firms are currently doing business in a more constraining regulatory, economic and political environment, so they need to refresh their strategies to best respond to this environment. Not all organisations will succeed in doing this in the year ahead. Those that do will be the ones that find ways of making this new environment work for them, capitalising on their resilience, agility and efficiency.”
For more analysis and details, please visit the 2017 Asia Pacific Financial Services Regulatory Outlook report or the Deloitte Asia Pacific Centre for Regulatory Strategy.
About Deloitte's Centre for Regulatory Strategy
The Deloitte Centre for Regulatory Strategy is a source of critical insights and advice, designed to assist the world’s largest financial institutions manage the strategic and aggregate impact of regional and international regulatory policy. With regional hubs in the Americas, Asia Pacific and EMEA, the Centre combines the strength of Deloitte’s network of experienced risk, regulatory, and industry professionals — including a deep roster of former regulators, industry specialists, and business advisers — with a rich understanding of the impact of regulations on business models and strategy.
The Centre is led by some of Deloitte’s most prominent risk & regulatory experts in the region:
- Kevin Nixon, Global & Asia Pacific Lead, Centre for Regulatory Strategy
- Tony Wood, Leader, Financial Services Enterprise Risk Services, Deloitte China
- Tsuyoshi Oyama, Leader, Centre for Risk Management Strategy, Deloitte Japan
- Tse Gan Thio, Leader, Cyber Risk Services, Deloitte Southeast Asia.