Asia Pacific Financial Services Regulatory Updates, Quarter Two 2021

The Deloitte Asia Pacific Centre for Regulatory Strategy is pleased to share with you the key regulatory updates from around our region for Q2 2021. 

Moving from pandemic to endemic: More than a year since COVID-19 was declared a global pandemic, the world is gradually learning to live with COVID-19 as an endemic disease. Vaccination rates are rising – albeit unevenly – and some countries are taking cautious steps to open up. 

Financial regulators are adjusting to the new normal too. After dealing with the massive COVID-19 disruption last year, regulators are refocusing on several key global regulatory initiatives like Basel III Final Reforms and LIBOR transition. But it is not simply "business as usual" for the regulatory community. In line with the "Build Back Better" agenda, a few themes are emerging among Asian regulators as below.

Operational Resilience: The unprecedented disruptions caused by COVID-19 has led to increased supervisory focus on operational resilience. Rapid adoption of alternative digital channels and work from home arrangements, together with the increased threat of cyber attacks, have added to supervisory concerns.

Globally, the Basel Committee has issued a set of Principles for Operational Resilience. The HKMA has asked financial institutions to adopt the Basel guidelines, while MAS has provided additional guidance on Risk Management and Operational Resilience in a Remote Working Environment.

Operational resilience straddles several areas, including business continuity management, cybersecurity and outsourcing risk management. In HK, financial institutions are being asked to consider the need for secure tertiary data backup to safeguard their operations in the event of cyber attacks. New Zealand has issued new cyber resilience guidance and India has published Guidelines for Managing Risks in Outsourcing for co-operative banks. Malaysia-based e-money issuers may soon need to segregate customer funds and implement enhanced business continuity, outsourcing and technology safeguards.

Sustainability:  Another development is that regulators have become more sensitive to the role that finance could play in promoting a sustainable economic recovery from COVID-19. They are doing so by providing regulatory guidance on how financial institutions should manage and disclose climate-related risks as well as on consistent standards for structuring green finance transactions. 

APRA and JFSA are consulting on draft guidance on Climate Change Financial Risks and Climate Transition Finance, respectively. In Malaysia, the BNM published a principle-based taxonomy to help financial institutions assess and categorise economic activities according to the extent to which they support climate objectives. Such taxonomy will promote standardised reporting of climate-related exposures and strengthen accountability and market transparency.

In Singapore, the Green Finance Industry Taskforce has developed a framework for green trade finance transactions, together with the recommended industry certifications. The taskforce has also proposed a roadmap for scaling green finance in the real estate, infrastructure and fund management sectors. In addition, workshops and e-learning modules will be launched to develop local capabilities in environment risk management.

Culture and Conduct: Finally, regulators are focusing on culture and conduct matters to ensure that the financial sector is built on sound ethical and governance foundations. Both China and Japan have introduced new corporate governance requirements for bancassurance and listed companies respectively. Australia have issued guidance on remuneration practices and financial advice fees, while Korea has put in place additional investor protection measures for complex products.

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