The next decade’s regulation goals – Reform assessment, supervision, and tech

The experts of financial regulations are going to tackle issues like reform assessment, improving supervision and mitigating cyber risk in the coming decade, said the managing director of Monetary Authority of Singapore (MAS), Mr. Ravi Menon.

He was attending a Symposium on Asian Banking and Finance, which was organized by the Federal Reserve Bank of San Francisco recently. Mr. Menon’s speech was very futuristic and seemed like an address being delivered in 2028.

He pointed that the next few years till 2021 would be transformative because the regulators will be evaluating and estimating the effectiveness and influence of all the reforms, which were announced, post the global financial crisis of 2008.

Some sectors which are worth considering are infrastructure financing, trade financing and also small- and medium-sector business financing and market liquidity, where all the previous reforms have resulted in “sub-optimal social outcomes”, he said. The regulators who were focusing on the mentioned areas would want to regulate the adjustments so that the limitations could be eased out while keeping the risk at a nominal level.

Post that, the regulators could shift their attention towards improving the level of supervision and also aim on enhancing the cross-border collaboration and how they are managing various risks.

According to him, by 2028, maybe all the regulators get together and work out a “culture and conduct supervision” which would mean sharing best practices and also information on delinquent and those professionals who are not following the guidelines so as to discourage “rolling bad apples”.

Here, technology also plays an important role over the next few years.  While handling operations, the supervisors probably would start to use the data analytics, assessment of the sentiments, and other various tools available in behavioral psychology to be able to learn more and get insights on the conduct and culture followed by different financial institutions.

However, there is an obstacle called cyber risk, which could gain prominence in terms of the regulatory schema followed by the central banks world-wide, said Mr. Menon. Hence the regulators might plan to set various standards for the distributed ledgers, and take efforts to make cloud computing services and dealing with artificial intelligence much safer.

The challenge, however, will be to stabilize the financial systems and also allow the financial sector to keep innovating and developing at the same time, so as to fulfill the requirements of the society and the economy on the whole.