arthur yuen : keep up the momentum - importance of sound bank culture in times of pandemic keynote speech by mr arthur yuen, deputy chief executive of the hong kong monetary authority, at the asifma ( asia securities industry & financial markets association ) compliance week 2021, virtual conference, 8 september 2021. * * * keep up the momentum : importance of sound bank culture in times of pandemic mark ( austen ), distinguished guests, ladies and gentlemen, good afternoon to all of you. 1. let me thank asifma for inviting me to address the compliance week 2021. i believe that, like me, most of you wish the event today could take place in person, because i ’ m sure we all miss the f2f dialogue. but with the dedication of asifma, i am sure today ’ s event would be as successful as one that is held physically. but that thought also reminds us that covid is still having a profound impact on many matters. bank culture and accountability, which is the event ’ s main theme for today, is certainly one of those that have been affected. understandably so, this subject has been much less talked - about while we have been spending a great deal of efforts in ensuring operational resilience. so today i am going to talk about our observations on this front, and how we can keep up the culture momentum within the industry. impact of covid - 19 on bank culture 2. covid - 19 has affected every aspect of our daily lives and work. from my vantage point as a banking supervisor, the most prominent impact of the pandemic has been a substantial increase in the popularity of digital banking among consumers. customers were kind of “ crash - coursed ” into accepting the provision of banking services through digital means. as an example, we have seen that the total applications for personal banking credit products via digital channels recorded a significant growth of more than 40 % in the second half of 2020 compared to the first half year, and among that, those made via mobile apps already surged to account for 40 % of the total digital applications. so the digital transformation has basically become a new normal. 3. against such a rapidly surging acceptance of online services, it is indeed extremely important for banks to substantially enhance their operational resilience on top of all the challenges that they face due to changes in the pandemic situation. the industry has been doing a fantastic job in that, but also we should not lose sight

sales staff might have deliberately conducted investment transactions for vulnerable customers through internet banking in order to circumvent controls for safeguarding the interests of those customers. 9. there are indeed issues that warrant our attention to ensure that a customer - friendly online journey will not compromise adequate customer protection. for example, on the use of technology such as video conferencing for distributing long term insurance products, the insurance authority has provided guidance on measures to address challenges, such as difficulties in obtaining wet signature from customers for the insurance policies, as well as the potential intermittent interruption during the sales process which do not exist in a physical f2f environment. the hkma is also working hard at the moment to provide the industry with further guidance and practical examples to address difficulties of banks on issues such as how to identify vulnerable customers in an online environment so that the bank can accord them with extra care during the sales process. 10. despite all these efforts in offering more detailed guidance to the industry, i ’ m sure you would agree that having such additional guidance alone cannot achieve the desired outcome. we do very much need the support of a sound bank culture, because culture is the invisible glue that holds a bank together. in fact, if one really thinks through the implications of the latest trends, culture does not become less important in the current environment. quite the opposite, culture has actually assumed an even more critical role in times of pandemic. and for that reason, we should remind ourselves repeatedly of the need to keep up the momentum in promoting sound bank culture in order to counter the additional risks brought about by the pandemic. our continued effort in the cultural landscape 11. so probably it will be useful if we quickly revisit what a “ sound ” culture should look like and what the core elements are? at the hkma, we always emphasise that there is no one single formulation of “ sound ” culture. and each bank needs to map out its own path according to its desired culture, values and behavioral standards. but overall, we encourage banks to focus on three fundamental elements in their culture efforts : ( a ) a strong “ tone from the top ” supported by a sound governance framework ; ( b ) an appropriate incentive system that induces desirable behaviours at all levels ; and then ( c ) we also need an effective “ echo from the bottom ” on actual outcomes on the ground. 12. this is clearly not the occasion to elaborate on each pillar here, and we have already communicated a