National regulators have been stepping up engagement with financial institutions on issues pertaining to culture and conduct. The industry must itself take collective responsibility to promote good practices and develop codes of conduct, and hold institutions accountable to their peers. Here in Australia, you have set a good example. The Australian Bankers’ Association has commissioned an independent review of sales commissions and product-based payments in retail banking that is now in its final stages. Banks have also agreed to share information among themselves on financial advisers with a history of poor conduct. But ultimately it is the financial institution itself that must bear responsibility for getting the culture right. There are a couple of things they can focus on. 2/7  BIS central bankers' speeches  First, set a clear tone from the top that is supported by concrete policies and leaders that walk the talk. Management decisions must consistently reflect the firm’s espoused values. Second, align human resource (HR) policies with the desired culture. From recruitment and training to rewards and penalties, compensation to career development, HR policies send the clearest signal to staff on the values that the firm regards as important. This is difficult but important work. We must move the financial industry to look beyond the question “is this legal” to the larger question “is this right”. Positioning regulation for technological innovation Let me now move to the third key thrust of financial regulation going forward – how to position for technological innovation. Financial technology or FinTech is transforming financial services.

Several regulators have introduced variants of the regulatory sandbox over the past year. In fact, I would say the sandbox is itself an experiment for regulators. There is much we can learn by sharing experiences and lessons from our different approaches. And ASIC is one regulator that we admire and watch closely on this front. Ta k e registration requirements. Most sandboxes require applicants to register prior to experimentation. The UK FCA has two fixed cohorts of applicants a year, while the MAS sandbox is always open for application. ASIC has an interesting approach. It has a class-exemption for firms testing a specific set of services for 12 months and up to 100 clients. Interested firms are required to notify ASIC before commencing business, provided they also meet certain consumer protection conditions. MAS opted for an application-based approach because we wanted to closely engage each applicant, understand the innovation, business model, and risks so as to customise the sandbox conditions. But each application is turning out to be quite time-consuming and we are mindful that our process does not get in the way of speed-to-market. So, we are keen to study ASIC’s experience with the class-exemption approach and see how our own approach can be improved. There are also interesting differences in the qualifying entities. HKMA’s sandbox is restricted to authorised institutions, while ASIC’s sandbox is restricted to FinTech start-ups. The MAS and UK FCA are open to both regulated entities and FinTech start-ups.