Welcome to the latest edition of Protiviti’s Asia-Pacific (APAC) Financial Services Insights. In this monthly newsletter, we provide a summary of important developments across the APAC financial services sector, including those related to the ever-changing regulatory landscape.
As financial institutions across APAC prepared to start a new year, cryptocurrency regulations and sustainability goals were top of mind for many. In Hong Kong, online-only banks aim to expand offerings in 2021 while in Singapore, FinTech investment rebounded four times over investment in the first quarter of 2020. Chinese regulators target fintech giants and internet platform loan offerings, and in Japan plans to ease its regulations on the entry of overseas investment funds.
Asian markets have been stepping up cryptocurrency regulations as they look to fortify the trading market and attract institutional investors. In the APAC region, a hotbed for cryptocurrency trading, the region’s financial hubs, Singapore, and Hong Kong, have introduced new licensing laws with a prerequisite to obtaining regulatory approval before trading is allowed.
(Techwire Asia, 02/12/2020)
Currently, the financial services industry’s spending in APAC excluding Japan represents 15% of the worldwide spending on AI. The International Data Corp. said that in the APAC financial services sector, most of the adoption is in user or data interaction and learning types of AI software technologies. The banking industry is the largest spender on AI in Asia/Pacific, led by the People’s Republic of China.
A growing number of borrowers in APAC are getting loans with interest rates linked to meeting sustainability goals, in one of the few bright spots for a corporate lending market depressed by the pandemic. The market for sustainability-linked loans in APAC excluding Japan took off in 2017, and borrowers have steadily increased since then.
China’s top banking regulator questioned the large financial technology companies and hinted at “timely and targeted measures to prevent new systemic risks.” Chinese regulators have been growing increasingly concerned about the size of its technology giants and have proposed draft rules to regulate areas including data use and antitrust.
China will allow such subsidiaries to act as sales agents for wealth management products for now and plans to extend the business to other financial institutions, according to the guidelines issued by the China Banking and Insurance Regulatory Commission.
China’s banking and insurance regulator suggested that some institutions and internet platforms have marketed loan products as free of interest, intentionally blurring the actual cost of such lending. The regulator also added that the over-packaging and marketing of products on the internet could lure some young people without stable incomes and consumers lacking financial knowledge into “uncontrolled and blind consumption.”
In its consultation paper, the MAS proposed to apply the guidelines to all banks, merchant banks and finance companies in relation to the extension of credit to corporate customers, underwriting for capital market transactions, and other activities that expose a bank to material environmental risk. The MAS clarified that banks have the flexibility to calibrate their risk management approach according to the risk posed.
(Regulation Asia, 09/12/2020)
Singapore's fintech investments rebounded in the second quarter of 2020 to 4.1 times the US$68M recorded in the first quarter. Also, according to the report, from 2015 to last year, about 65 per cent of fintech funding in South-east Asia was directed to Singapore businesses, nearly four times the funding received by Indonesia the next largest market.
(Straits Times, 10/12/2020)
The DBS exchange will be the very first cryptocurrency exchange backed by a traditional bank. The exchange will also support the roll-out of Security Token Offerings (STOs) besides the exchange of its supported tokens. The STOs will allow medium-sized enterprises to multinational corporations to raise capital by digitizing their financial assets such as shares in unlisted companies, bonds, and private equity funds.
From the start of 2021, APRA will no longer hold banks to a minimum level of earnings retention. The results of APRA’s extensive ADI stress testing provide reassurance that the banking system remains well positioned to absorb the impact of a severe economic shock and retain the capacity to continue supplying credit into the economy.
The new guide, "Navigating Payments for New Entrants", provides an overview of payment system regulation, the different models for participation, and the regulatory licences that might be required to help new entrants better understand Australia’s payment systems. The guide is a result of research and consultation with new entrants and financial sector regulators to better understand the needs of new entrants to payments.
Hong Kong, S.A.R.
The Securities and Futures Commission has just given out the first-ever crypto license to OSL Digital Securities which will soon commence trading several cryptocurrencies, including Bitcoin. In addition to the Hong Kong license, OSL has also applied with the Monetary Authority of Singapore for a digital asset license under the Payment Services Act.
Online-only banks seek more lucrative avenues beyond basic services. Eight new digital banks are betting they can win over customers with more attractive interest rates on savings and loans which they are able to offer in the absence of costly branch networks as well as with more user-friendly customer apps and other advantages developed by their backers.
The HKMA has announced the launch of iAM Smart (internet Access by Mobile in a Smart way), a digital identity service that enables users to leverage the biometrics in their smartphone to act as proof of identity for all types of digital services including those provided by financial firms.
The FSA plans to allow banks to target advertising sales using their customer data as part of its moves to ease restrictions on the banking industry. The FSA, at the strong request of the megabanks, will allow banks to use information on their users' account activities and credit card histories so they can sell companies space on their websites for advertisements targeting specific age groups, genders and purchasing habits.
(The Japan Times, 02/12/2020)
Japan’s FSA plans to ease its regulations, including on the entry of overseas investment funds into the Japanese market, to realize the government’s goal of creating an attractive international financial center in the country. The deregulation plan was included in a set of measures aimed at attracting more foreign financiers that was compiled at a Financial System Council working group meeting.
Japan is gearing up its preparation for the issuance of digital currency in both the public and private sectors following swift moves by China and other countries to do the same. The BOJ has said it will launch a feasibility study on its digital currency in fiscal 2021 starting in April.
(The Japan Times, 24/12/2020)