with new technologies, and that the sandbox provides a valuable means to test new regtech solutions. 2 / 4 bis central bankers'speeches finally, collaboration among different parts of the ecosystem is crucial. my colleague raymond chan has highlighted the importance of collaboration in the ‘ path forward ’ session. regtech solution providers and professional services providers, such as technology firms and advisory firms, have a wealth of knowledge and experience supporting regtech implementations. as ms jessica tan noted, these technology companies can help to bridge the gaps that banks may have in technical capability, people and skills. we also heard today that some banks have successfully implemented regtech using external vendor technology for some of their solutions. leveraging such expertise in turn frees up banks to focus on their core value propositions and competitive edge. how to grow and nurture regtech in hong kong 13. some of the regtech adoption challenges are technical ones. but one very common barrier is mindset. we have heard multiple speakers who are leaders in their respective organisations say today that investment in regtech is growing, and it will grow even faster in the future. how can we ensure that the mindset for growth is in place throughout the regtech ecosystem? 14. one way with which we promote regtech adoption in hong kong is by providing an environment conducive to the development of regtech solutions. this includes attracting top talent to the city. the global regtech challenge was one such initiative. earlier, we had the regtech challenge finalists presenting their amazing solutions for transforming risk management and regulatory compliance processes. my congratulations go to the four winners, as well as to the other participants for some brilliant ideas in response to the four problem statements. i am truly impressed by all the solutions, and i hope to see our banking community benefit from similar solutions in the near future. maybe the hkma should also explore the use of some of those solutions as well. 15. apart from the global regtech challenge, the hkma has launched multiple initiatives to grow regtech in hong kong. some of those include the fintech supervisory sandbox, the fintech career accelerator scheme, and a regtech skills framework that we will be releasing in the coming months. 16. industry associations also play a key role in promoting regtech adoption in hong kong, because they help foster greater industry collaboration and communication. it was good to hear in our ‘ path forward ’ panel that following the publication of our regtech white paper in november last year, there has

improved policy framework, robust external reserves and resilient banking systems. yet the crisis affected virtually all emes, denting the credibility of the decoupling hypothesis. eme central banks found that transparently communicating why and how they were affected by the crisis, notwithstanding the decoupling hypothesis, actually helped assuage concerns and revive market confidence. 58. in the post - crisis period, the major way in which eme central banks have used communication is in giving forward guidance on monetary policy. 59. in the reserve bank too, we have started the practice of giving forward guidance on monetary policy. because of its potential impact, we pay much more attention to the language and nuancing of the “ forward guidance ” paragraphs than other parts of the statement. our experience in this regard has been quite positive. nevertheless, we face some challenges. let me give you a flavor of that. 60. forward guidance is always conditional. the dilemma then is how precisely the conditionality is to be communicated, and how to ensure that the market does not ignore the conditionality and interpret the guidance as an irrevocable commitment. conversely, how does the central bank ensure that it does not become hostage to its guidance? 61. also, the more uncertain the situation, the greater the need for guidance. but also, the more uncertain the situation, the more difficult it is to give definitive guidance. for example, when the forward outlook is uncertain, we are not able to precisely define the conditions under which the guidance holds and the conditions under which we may have to deviate from it. when we are not forthcoming on specifying the conditions, the market starts speculating on them, thereby raising the “ noise ” to message ratio. 62. despite these challenges, in the reserve bank, our experience with greater openness has been quite positive. we found that effective communication can be a powerful tool provided the central bank has credibility. 63. as their financial sectors get deeper and more sophisticated, eme central banks can usefully leverage on communication to enhance their policy effectiveness. to do so however, they have to improve their policy credibility as well as capacity levels. conclusion 64. central banks and central bankers have been at the heart of the global financial crisis. they have been blamed for policies and actions that got the world into the crisis ; they have also been praised for leading from the front in getting the world out of the crisis. i believe this is fair critique – central banks have been a