2023 Asia Pacific Financial Services Regulatory Outlook

As we begin 2023, it can be useful to reflect on our outlook at the start of 2022. In last year’s Regulatory Outlook, our perspective was largely positive. We contemplated the end of the COVID-19 pandemic, with a level of confidence that Asia Pacific (AP) economies and firms were better prepared than their global counterparts to both withstand and respond to the scenarios that may emerge. We expected that the worst was behind us – with the exception of concerns around inflation, increasing credit risk exposures and the ongoing war for talent. Positively, we saw that FS firms in AP generally responded well to the pandemic, and the additional global stresses that came during 2022.

However, in comparison to last year, 2023 brings a new set of challenging operating conditions for financial services (FS) firms worldwide: high inflation, interest rate volatility, disruptions to global supply chains, and slowing economies. The International Monetary Fund’s (IMF) sobering assessment is that “the worst is yet to come.”ⁱ

For regulators, their role will continue to be complex and challenging. As the Russia-Ukraine conflict continues, the impact of sustainability and climate change, increasing operational resilience and the impact of inflation and interest rate rises will remain areas of focus, and compete for priority with AP regulators and FS firms alike. For FS firms, particularly those with a focus on growth, navigating 2023 and beyond will need a clearer focus and vision, including balancing growth objectives with consideration of social and economic inclusion. It is clear that we can’t yet say we have emerged from the COVID crisis and its related impacts, in 2023, there are many moving parts that both regulators and FS firms alike will need to navigate – and there remains much work to be done.

It is with this context in mind that we have set out the upcoming sections of this year’s Regulatory Outlook as follows:

• Macroeconomic Environment and Regulatory Agendas
• Operational Resilience
•  Digital Assets
• Sustainability and Climate
• Future of FS Regulation in the AP Region

These are and will continue to be high priority issues for both regulators and FS firms in AP. We urge firms to think through what these issues mean for their business models, and what strategic decisions they will have to make as a result.

ⁱ International Monetary Fund, “World Economic Outlook”, October 11, 2022.