Eddie Yue: Opening remarks on regtech
Opening remarks by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at the
HKMA's "Unlocking the Power of Regtech" event, 30 June 2021.
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Introduction
1. Good morning, good afternoon and good evening everyone. A very warm welcome to all the
participants of today's event, "Unlocking the Power of Regtech".
2. Just a few years ago, a virtual conference like this would have been a near impossibility. I
am sure you would also remember the days of expensive international travel, but today,
advances in technology have transformed our ability to communicate and share with others
in every part of the world. Similarly, technology has also fundamentally revolutionised the
way banking business is undertaken.
HKMA's banking technology goals
3. One of the HKMA's key policy goals is to encourage the application of innovative technology
in the banking industry. Our recently announced strategy,
"Hong Kong Fintech 2025"
which goes far beyond our Smart Banking Initiatives which were announced a few years
back, is an ambitious plan for getting Hong Kong's banking sector to embrace and adopt
new technology and rise to a high level of sophistication.
4. And within that Fintech journey that we are promoting, Regtech constitutes an integral and
important driver within our strategy. On that, we have developed a vision that by 2025, Hong
Kong will become a leading hub for developing Regtech solutions and cultivating Regtech
talents. My colleague Arthur first presented this vision at the Hong Kong Fintech Week last
November. On that occasion, we also announced a series of activities to be launched these
two years in pursuit of the vision. And today's event is one of the many activities that we
have planned for this year, 2021.
5. In practical terms, how should we go about bringing our Regtech vision into reality? We do
recognise that we are starting from a position in which many banking practitioners remain
quite unclear about the concept of Regtech. They may be uncertain about what values
Regtech might bring, or exactly how they should leverage on Regtech in order to bring about
measurable benefits. Here, we see four essential actions that are needed to transform bank
attitudes and practices towards Regtech.
Four actions towards Regtech 2025
6. The first action is that we at the HKMA must
understand the Regtech landscape
evolution in Hong Kong. It's no good launching initiatives that are out of touch with what's
actually happening on the ground. We need to be able to map our progress towards
Regtech 2025, and understand where our banks and other ecosystem partners are at in that
journey.
7. Our White Paper on Regtech published in November last year provided a very good starting
point, supplemented by the Regtech Adoption Index that we have just launched recently.
These have shown that most banks here are already using at least some form of Regtech in
their operations, most commonly in preventing and detecting financial crimes. But they are
using Regtech much less in their risk management and regulatory compliance activities,
despite the many advantages that doing so could bring for them.
8. More generally, banks currently have little engagement with the wider Regtech ecosystem.
We found that only 16% of banks are currently taking part in associations and industry
groups and only 33% of banks are partnering with Regtech firms. So this is an area that
definitely needs more work.
9. Our second action is to among banks - in particular their
raise Regtech awareness
awareness of the benefits, applications and solutions associated with Regtech.
10. Our Regtech Adoption Index told us that a massive 86% of banks consider one of the top
public sector activities in this space should be to enhance the engagement between the
banking sector and the Regtech ecosystem.
11. And this is where today's virtual event comes in! It brings together banks, regulators,
Regtech providers, industry associations, and representatives from other parts of the
Regtech ecosystem. We see this as a perfect opportunity for banks to learn more about the
potential benefits of Regtech for their own operations and also for their customers.
12. As part of the efforts to raise awareness, the HKMA has also been publishing a series of
Regtech Watch newsletters since November 2019. This series of articles outlines the
benefits of Regtech through providing high-level sample use cases for areas like Cyber Risk,
Credit Risk, AML/CFT, and also Conduct Management.
13. Building on the Regtech Watch, we are launching a new series called "Regtech Adoption
Practice Guides". This provides more practical implementation guidance when you use
Regtech. We also plan to create a centralised Regtech knowledge hub as a platform for
sharing Regtech information and content. We do hope that all these initiatives taken together
will allow banks to become much more familiar with Regtech and also help them manage
the Regtech adoption process.
14. The third action we are taking is to encourage new Regtech solutions. It's one thing to
help banks become willing and ready to embrace Regtech. But they will only do this if there
are fit-for-purpose Regtech solutions to enhance the way that they manage their
businesses. This requires commitment from Regtech companies and financial institutions,
and also support from the regulators and Government.
15. One way to encourage new solutions and innovation is through offering incentives and
organising competitions to resolve real-life pain points. In March this year the HKMA
launched the Global Regtech Challenge. This competition motivated 86 global and local
Regtech firms to come up with possible Regtech solutions for four specific pain points faced
by banks in Hong Kong in the areas of Governance, Risk and Compliance; Conduct and
Customer Protection; Customer Data Privacy; and also Stress Testing. Later today we will
announce the winners from this Challenge, and the audience will hear more about how the
innovative solutions can benefit banks in Hong Kong.
16. Working alongside us is the Financial Services and the Treasury Bureau. This January, the
Bureau launched a Fintech Proof-of-Concept Subsidy Scheme. This scheme provides
financial incentives to banks to transform their processes through the use of innovative
Regtech solutions. Regtech firms will also benefit as they will have more opportunities to
showcase and validate their solutions and gain experience in the Hong Kong market.
17. In addition to offering incentives and opportunities for developing innovative use cases, I
would also like to highlight several key infrastructure developments that will make launching
Regtech solutions easier.
18. One example of these is that the HKMA is developing the CDI, the Commercial Data
Interchange, that will allow SMEs to grant financial institutions access to their data at
different commercial establishments, of course with their consent. These will include
ecommerce platforms and utilities companies. With more alternative data available to
financial institutions, SMEs will stand a better chance of obtaining bank financing and also
other customised services that will be made possible by the use of advanced data analytics.
19. I should also mention the HKMA's collaboration with the Government on the "iAM Smart"
platform, which is a one-stop personalised digital services platform available free of charge
for everyone in Hong Kong. Financial institutions can now leverage iAM Smart to provide
customers with Regtech services such as remote onboarding and log-in authentication. The
HKMA is now exploring a corporate version of iAM Smart, which will offer another important
infrastructure to support Regtech development.
20. Finally, the fourth action that the HKMA will pursue is to expand the Regtech ecosystem,
including in particular the nurturing of talents.
21. We are working on a Regtech skills framework to incorporate Regtech skillsets into a
package that banks can adopt in ensuring that their staff are properly equipped for the
Regtech journey. We will also translate this into an Enhanced Competency Framework
module to encourage current and aspiring practitioners to get qualified and recognised for
this area of work. This will hopefully generate momentum among banks in upskilling their
banking practitioners to prepare for the Regtech evolution ahead.
22. In addition, we will continue to look for ways to enhance interaction within the ecosystem.
The HKMA will organise events like today's conference to bring together partners in the
ecosystem and to foster co-operation. We will also work closely with financial institutions
and the tech community, whether they are in Hong Kong or elsewhere, to ensure that new
Regtech initiative is widely publicised and actively participated.
Summary
23. So there we have it - four actions to realise the Regtech 2025 vision: Understand the
Regtech landscape; raise the Regtech awareness; encourage Regtech solutions; and
expand the Regtech ecosystem.
24. Everyone here has a part to play in this. I warmly invite you to reflect on what you can offer,
and what is on offer for you. I trust that everyone here today will make good use of our
networking lounge and virtual booths to connect and exchange ideas and insights. And I
believe that the future of Regtech in Hong Kong is very bright, and there are opportunities for
everyone.
25. Thank you for joining us on our Regtech journey. Before I finish, let me take this opportunity
to express my heartfelt thanks to so many distinguished speakers who have taken time out
of their respective busy schedule to contribute towards the discussion sessions today. I
should of course also thank everyone of you participating in this event from around the world.
I'm confident that the event will deliver rich rewards for all of us. Thank you very much.