Asia Pacific Financial Services Regulatory Updates, Quarter One 2023

The Deloitte Asia Pacific Centre for Regulatory Strategy (ACRS) is pleased to share with you the key regulatory updates from our region for Q1 2023.

This quarter, we would like to welcome Sean Moore (Partner, Australia) to the ACRS. Sean joins as the new Australia co-lead, taking over the position from Mike Ritchie. We’d like to thank Mike for his leadership in the ACRS, and for his contribution to the financial services industry throughout an exemplary career spanning over 35 years.

Reflecting on the past, focusing on the future:  
The first quarter of 2023 saw continued uncertainty, with inflationary pressures, ongoing supply chain issues, natural disasters, and geopolitical flashpoints in the region and beyond.  Reflecting on these issues and the challenges they bring when setting their priorities for 2023 and beyond, governments and regulatory agencies across the Asia Pacific (AP) region continue to take active measures to strengthen the overall resilience of the financial ecosystem, whilst looking to the future.  

For example, in its priorities for 2023, the HKMA noted managing climate risk and assisting banks to transition towards a low-carbon economy were key development priorities in 2023. In Australia, the prudential regulator, APRA, noted strengthening the overall financial and operational resilience of regulated entities was a key policy and supervision focus for 2023.

Responding to recent market events and maintaining focus on managing financial risk:  
Events such as the recent collapse of banks in the US and EU have prompted the BCBS and regulators across the AP region to sharpen their focus on assessing the risks to the financial stability of the global banking system, due to deteriorating economic conditions, higher interest rates, and market instability.  

In response to recent events, the BCBS reaffirmed their expectation that banks continue with implementation of Basel III requirements as soon as possible, noting that several jurisdictions in the AP region (e.g. Australia, Singapore, Japan, Malaysia, Philippines, China Mainland and Hong Kong SAR) have recently released revised capital rules, in line with the Basel III reform package, and aim to be compliant between 2023 and 2025, in alignment with the US, EU and UK. Elsewhere, regulators across the AP region have directly responded to recent market events. For example, Australia’s APRA has increased the frequency of, and existing approach to stress testing, by incorporating scenarios that capture rapid deposit withdrawals, and channels for contagion. 

Strengthening operational resilience:  
Strengthening operational resilience continues to be a key area of focus by regulators and FS firms alike in the post-COVID era, particularly amidst ongoing supply chain disruption, and the occurrence of high-profile incidents impacting both FS providers, and their third-party vendors.  These issues have prompted regulators and FS firms alike to rethink how they balance efficiency and resilience, with several regulators across the region (e.g. Japan, Australia, Thailand) publishing consultation papers aimed at increasing operational resilience by strengthening operational risk management and business continuity practices. Elsewhere, regulators such as Indonesia’s OJK and Malaysia’s BNM released updated regulations during Q1 with a focus on managing cybersecurity and resilience, and supporting the development of robust business continuity management frameworks.

Climate risk, sustainability and green finance:  
The first quarter of 2023 also saw a renewed focus on managing climate change and transitioning to a greener, more sustainable future. Recognising the important role financial institutions have in supporting the transition towards a more sustainable, low-carbon future, regulators across the region (such as Singapore, Taiwan and Thailand) have released a range of public consultations on their proposed green taxonomy. Key themes observed within the proposed taxonomies include a focus on the promotion of sustainable financing, and measures to support industries to reduce greenhouse gas emissions and transition towards a lower-carbon economy, in order to meet many of the net-zero commitments pledged by companies and jurisdictions globally in the lead up to last year’s COP27. As noted in our Q4 2022 update, strengthened cooperation across the region and global (for example, through the alignment of regulatory standards), as well as improving data comparability and availability will help to support efforts to combat climate change and build a more sustainable, and inclusive future.

Progressing regulation in response to new technology and business models:
The digital revolution continues, and the rapid pace of technological change has prompted regulators across the AP region to release a number of consultation papers and guidelines in response.  For example, the Bank of Thailand launched a consultation into the proposed Virtual Bank Licensing Framework, which aims to support Thailand’s transition towards a sustainable digital economy. On the digital assets front, regulators in the Philippines released a guidance note on risk management measures relating to safekeeping, liquidity and third-party requirements for virtual (digital) assets, highlighting their expectation that FS firms dealing with digital assets should ensure appropriate measures are in place to effectively manage risks that may jeopardise the safety and security of client monies. Elsewhere in the region, regulators such as the Reserve Bank of Australia continue to explore the potential use cases and benefits of a Central Bank Digital Currency (CBDC), which providers invited to participate in a live pilot over the next few months that will help to inform the potential role of a CBDC in the Australian economy.

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