MAS views seriously the responsibility of banks to safeguard the integrity and security of customer information held by the bank and its service providers. To enhance the protection of critical customer information, outsourcing arrangements involving certain customer information will be subject to a higher standard of care. •  Third, a greater focus on FIs’ outsourcing risk management framework. FIs were previously expected to pre-notify MAS of any material outsourcing arrangements, and MAS would impose prudential requirements on the FI, where necessary. With the growing prevalence and complexity of outsourcing arrangements, such a caseby-case approach has become less tenable. Instead, MAS will continue to assess and monitor the robustness of FIs’ outsourcing risk management frameworks while FIs will continue to be responsible for ensuring the safety of all of their outsourcing  4  BIS central bankers’ speeches  arrangements. The revised Guidelines will no longer require FIs to pre-notify MAS of any outsourcing arrangements. 24. The Guidelines are not intended to be exhaustive. MAS recognises that the diverse range of outsourcing arrangements and rapid pace of progress in digital technology preclude a prescriptive approach to risk management practices for outsourcing or a one-size-fits-all set of rules. MAS will adopt a risk-based approach in implementing the guidelines. Conclusion 25. Let me conclude. 26. A tougher macrcoeconomic environment and growing complexity of operational and technology risks will place greater demand on banks’ risk management and compliance systems.

The prolonged period of low interest rates presents particular challenges for the banking sector. •  First, lower interest rates, a flattening of the yield curve, and lower corporate investment mean net interest income and profits are being squeezed. BIS central bankers’ speeches  1  •  Second, low interest rates and investment returns are driving a search for yield among households, asset managers and institutional investors, which could lead to excessive risk-taking and growing financial vulnerabilities. 6. Periodic bouts of heightened volatility in financial markets over the past few years, triggered by events such as the taper tantrum, normalisation of interest rates in the US, transition to a more market-based exchange rate system for the Chinese currency, and just days ago, the UK’s decision to leave the EU, underscore the fragility of global financial markets. At the same time, tightening financial conditions in the emerging market economies (EMEs) as a result of a stronger US dollar have exposed financial vulnerabilities due to excessive corporate and household borrowings in some EMEs. 7. This means that banks have to continue to update their risk management capabilities to cope with a more uncertain environment. MAS as the financial regulator has also been strengthening our risk surveillance and updating aspects of our regulatory framework. This evening I would like to touch on the following: •  stress test exercises to ensure resilience to emerging risks;  •  efforts to enhance cyber security; and  •  guidelines to strengthen risk management of outsourcing arrangements.