Asia Pacific Financial Services Regulatory Updates, Quarter Four 2021
The Deloitte Asia Pacific Centre for Regulatory Strategy is pleased to share with you the key regulatory updates from around our region for Q4 2021.
COVID-19 in a new phase: Incremental COVID-19 impacts have started to fade as infections from the Delta variant gradually come under control, even in the severely affected jurisdictions such as Thailand and Indonesia. Though regulators are still cautious about the next wave of new cases, the number of pandemic-related measures is relatively small in this quarter. Rather, regulators’ attention has now shifted to the “back to normal” topics such as Basel III implementation and financial supervisory frameworks.
New threats to the financial systems came arise as the Omicron variant, in a much faster pace, began to spread. Particularly, emerging economies with lower vaccination rates could be more vulnerable to the new wave. Effectively, the new variant could have a backspin on the resumption of economic and social activities. Furthermore, outlook for the U.S. monetary policy for interest rate hikes may cause devaluation of the emerging currencies.
We believe the regulatory/monetary/fiscal policies in Asia Pacific (AP) have remained on their way to normalization in Q4, however there are still uncertainties lying ahead.
Climate and sustainability: Climate risk has been a focus area with increasing importance in AP. UK/EU regulators are leading key topic areas such as climate and social taxonomies. UK regulators indicated in Q4 their intention of potentially setting capital requirements on climate risk.
In AP, the majority of jurisdictions are prone to natural disasters (Typhoon, earthquake, and floods), while their economies rely heavily on natural resources. On the other hand, a range of fragmented regulatory frameworks are being formed across the AP region. To address regulatory fragmentation, Association of Southeast Asian Nations (ASEAN) proposed an initiative to establish a common climate taxonomy for member states that reflects the unique geographical and social characteristics of the region.
Technology and data: Data protection is another focus area of regulators, reflecting governments’ stances to ensure national security against the backdrop of geopolitical developments within and outside of AP. In 2021, several personal data protection rules have come into effect, for example in China and India. Governments are also keen to protect intellectual property rights and enhance cybersecurity.
In the meantime, governments are utilising new technology and data to empower economic growth. A number of AP jurisdictions, such as Singapore and Hong Kong SAR, have put forward initiatives to promote fintech or non-bank payment systems. Financial supervisors are now required to cover a wider scope of financial industries, including digital payments, digital currencies, and non-bank financial intermediaries. AP regulations, as well as those of other global regions, are expected to modernise their supervisory frameworks to stay aligned with the evolving financial business landscape
In 2022, we expect that the economic recovery will be stabilised, and that regulators and the FS firms will have more time to take the “new-normal” into consideration for the financial system. The financial sector will need to bear more social and environmental responsibilities, as the clock is ticking toward 2030, the target deadline for emission reduction committed by many nations. FS firms will play an important role in the green transition, through providing financing, bond arrangements, and other financial schemes. It may be challenging to achieve those targets with entirely market-based tools such as carbon-taxes, therefore policymakers will need to utilise their institutional or supervisory powers to prompt market participants’ commitments to concrete plans and actions. FS firms will be key actors, in collaboration with regulators, to incentivise the agents and monetise de-carbonisation for the coming decades.