Cyber risk and operational resilience will be the top priorities for securities regulators across the Asia-Pacific region in the year ahead, a conference has heard. Speakers during a keynote panel at the ASIFMA Compliance Week 2021 said the rapid transition to remote and hybrid working, along with non-face-to-face business, had opened up new vulnerabilities in the financial system.
Regulators will also be focusing on Environmental, Social and Governance (ESG) issues, fraud and financial crime, COVID-19 recovery and economic resilience and digital assets — including cyptocurrencies and fintech.
Speakers at the ASIFMA conference said securities market participants needed to remain on the lookout for new threat vectors as cyber risks escalate. They said cyber security could lead to operation risk issues due to the significant vulnerabilities that arise with ransomware, data loss, system outages and other online threats.
Lim Tuang Lee, assistant managing director for capital markets at the Monetary Authority Singapore (MAS), said the lines between regulated and unregulated product offerings were blurring with the move to so-called “embedded digital finance”. Lee said this was driven by a push to enhance the customer experience with seamless digital product offerings but it could also give rise to regulatory risks.
“We already see that financial institutions are partnering with non-financial firms in what is commonly now known as ’embedded finance’, so that financial services are embedded in partners’ digital platforms and products to facilitate the distribution of financial services. Digitalisation has made this more seamless and the line between what is regulated and what is not is no longer so obvious,” Lee said.
“It also means that the ecosystems are now more interconnected. This creates opportunities but also introduces new risks that can easily spill over from one system into another.”
Cathie Armour, commissioner of the Australian Securities and Investments Commission (ASIC), said collaboration between regional regulators was crucial to manage the cross-border systemic risks that had arisen as a result of the pandemic. She said it was important for regulators to ensure they do not hamper innovation but rather work to support a robust, reliable and secure securities market.
“We need to make sure we’re well positioned to take advantage of the benefits to our economy from the acceleration of the move to a digital economy. Those sorts of things like sandboxes and making sure that we’re supportive where we can be of regtech initiatives, which I think are really important to help our audience of compliance and risk teams to manage their responsibilities,” Armour said.
Powering the economic recovery
Ruenvadee Suwanmongkol, secretary-general of the Securities and Exchange Commission in Thailand, said one of the opportunities in the wake of the pandemic would be to ensure that small-and-medium-sized enterprises (SMEs) have access to capital markets to fuel the broader economic recovery.
“SMEs play a very key role in the economy. In Thailand they contributed 40% of GDP before the pandemic came along. They are the biggest employer and when the pandemic came along it was a hard hit to them.
“For SMEs we work together with them along with other regulators and other government sectors. But to be fair, SMEs in Thailand don’t understand capital markets very well.”
Suwanmongkol said there was a strong need for securities regulators to support SMEs to better understand their ability to access funding through the capital markets.
A live poll of delegates at the conference found that most securities market participants also see cyber risk and operational risk as the top regulatory priorities. This was followed by concerns about the regulation of digital assets — including cyptocurrencies and fintech.
Written by: Nathan Lynch, APAC Managing Editor, Thomson Reuters Regulatory Intelligence