Financial services regional regulatory outlook 2016
The year for Asia Pacific to make its voice heard
10 December 2015: Financial institutions in the Asia Pacific region will continue to face a significant agenda of regulatory policy development and implementation challenges impacting business strategy. In an Outlook Report launched today, the Deloitte Asia Pacific Centre for Regulatory Strategy predicts that regulatory trends in 2016 will, as in the past few years, be largely driven by international developments.
The program of policy development and supervisory focus can be grouped into three major themes:
- Culture and conduct
Overlaying these critical themes will be the equally complex issue of implementation, according to Kevin Nixon, Lead Partner of the Deloitte Asia Pacific Centre for Regulatory Strategy. “APAC financial institutions will continue to face elevated implementation challenges within an ongoing policy environment that has significant strategic implications,” Mr Nixon said.
“Our paper outlines the moving pieces in 2016, from substantial changes in how capital requirements are calculated, to the associated and ongoing reforms such as Total Loss absorbing Capacity (TLAC) and recovery and resolution planning designed to end ‘Too-Big-To-Fail’, to the ever-constant pressure to improve and demonstrate good conduct and culture.
“Digital innovation will play a major role in altering the environment for delivery of financial services.”
Dr. Janson Yap, Deloitte’s Asia Pacific Enterprise Risk Services Leader said: "Financial institutions in Asia Pacific are under increasing pressure to meet international regulatory timelines while managing varied local regulatory requirements. Our aim is to help organisations navigate these challenges by taking a forward looking view of regulation and its implications on business strategy.”
The Deloitte Global Change, Regional Context paper suggests that strategic impacts and implementation programs are best managed in a total reform context.
Mr Nixon said: “Implementing individual requirements, as well as adapting business strategy to regulatory initiatives, is best done with an understanding of policy intent and future reforms. Understanding this in a holistic context is vital.
“International trends continue to define the landscape, and local regulators and institutions need to adapt according to the local environment. This complex ecosystem therefore needs to ensure global policies take into account varying circumstances. Given China will assume the presidency of the G-20 in 2016, there will be a heightened opportunity for the region and its institutions to voice their opinions on the international agenda. This is the time to understand and outline the challenges and possible responses across the region’s diverse financial systems, economic needs and stages of development.”
Across the region
Mr Nixon, who is also the Financial Services Industry Risk & Regulatory Leader for Deloitte Australia, said: “In Australia, financial institutions have a comprehensive local agenda to manage following the Government’s recent adoption of nearly all recommendations of the Financial System Inquiry. While some of these are aligned with, and dependent on, global policy outcomes (such as mortgage risk weights), there is a significant local body of work through 2016 and beyond.
The Financial Services Industry Risk & Regulatory leader for Deloitte China and Hong Kong, Tony Wood suggests that: “Engagement with the policy agenda, particularly in the year of China’s G-20 presidency will be essential to ensure that regulatory reforms are pursued in a manner that is sensitive to the interests of the Asia Pacific region.”
“As Chinese firms continue to expand their international activities, at the same time as there is greater internationalisation of the currency and economy, understanding international trends, cross-border challenges, and market opportunities is of critical importance.
Tsuyoshi Oyama, Head of Deloitte’s Center for Risk Management Strategy, Deloitte Japan said: “In Japan the banking sector is challenged by some revisions of the Basel framework, including credit, operational and interest rate risk in the banking book, and is also increasingly concerned with continuing uncertainties over the future course of regulation.”
Tse Gan Thio, Cyber Risk Services Leader, Deloitte Southeast Asia said: “In Southeast Asia we are dealing with markets in varied stages of development, and the cross-border and extra-territorial aspects of the reform agenda feature high on the agenda.”
He added: “Across the entire APAC region regulators are increasingly worried about the risk posed by high degrees of reliance on technology systems, especially how high-profile cyber-attacks and market instability caused by faulty algorithms have exposed the risks that our reliance on technology can bring. We are seeing regulators impose specific risk management requirements for technology with respect to cyber-resiliency, outsourcing and the testing of trading algorithms.”
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