Asia Pacific Financial Services Regulatory Updates, Quarter One 2021

The Deloitte Asia Pacific Centre for Regulatory Strategy is pleased to share with you the key regulatory updates from around our region for Q1 2021. 

A diverse range of topics were covered over the quarter including financial crime, operational continuity, incentive schemes, disclosures and reporting, whistle-blowing, capital adequacy and solvency of insurance companies. 

COVID-19 continues to impact the region to varying degrees as vaccination programmes commence in many Asia Pacific countries. During Q1 2021, many Asia Pacific countries extended their COVID-19 measures. In Hong Kong SAR and South Korea, holiday repayments of the principal and interest on certain loans was extended and Indonesia expanded some of its policies to support smallholder credit banks. South Korea also announced a supplementary budget for 2021 worth KRW14.9 trillion to mitigate the impact of COVID-19 on, for example, SMEs and the employment market. Meanwhile, Taiwan asked domestic banks and insurers to undertake stress tests to assess their financial resilience, while Singapore focused on managing the new risks that could emerge from extensive remote working arrangements including operations, technology and information security risk, as well as potential increases in fraud and staff misconduct.

Conversely, the Reserve Bank of New Zealand began to cautiously roll back COVID-19 measures, announcing the removal of some of its temporary liquidity facilities. 

However, given the lengthy timeframes for vaccination across the APAC region and uncertainty around the effectiveness of the vaccine, it remains unclear how long COVID-19 measures will continue and what impact the eventual rollback of measures will have on both the financial services industry and broader economy. 

There were a number of developments supporting technology and the digitalization of financial services. The Hong Kong Monetary Authority launched the second phase of its central bank digital currency project, focusing on distributed ledger technology, while South Korea announced that it would relax certain regulations in order to enable internet companies to develop and sell digitized insurance products.

On the other hand, some regions focused on digital risk; for example, China mainland set out robust risk management requirements for commercial banks' internet loan businesses as well as limits on online loan extension. There was also a clampdown on illegal fundraising following a growth in financial risks brought about by increasing peer-to-peer lending and access to digital assets. Singapore issued revised Technology Risk Management Guidelines to keep pace with emerging technologies and shifts in the cyber threat landscape and Thailand focused on maintaining the security of “essential information technology” of payment systems operators. 

Several regions issued benchmark reform related updates. The Japanese authorities set out their expectations regarding transition away from panel-based LIBOR and synthetic yen LIBOR. South Korea made the decision to replace LIBOR with the overnight repo rate of government bonds and monetary stabilization bonds due to their market liquidity and broad use in derivative markets. 

Climate change and sustainability was relatively quieter this quarter - Hong Kong SAR successfully issued US$2.5 billion of green bonds, including the first 30-year tenor green bond to be issued by an Asian government. Singapore also launched a proposal for a green taxonomy and a handbook on implementing environmental risk management.

Lastly, the Australian regulator published its priorities for 2021, which not surprisingly included strengthening crisis preparedness and maintaining financial system resilience, as well as prudential requirements for operational risk, climate change financial risk guidelines and increased scrutiny of entities' cybersecurity capabilities.

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