but from other banks which leverage fintech better. regulation of fintech 9. as fintech is transforming the financial landscape, the nature of regulation has to adjust. the sheer diversity in the functions performed by fintech firms, necessitates a widening of the regulatory perimeter. the approach to regulation also needs to adapt to the type of entity being regulated. while similar activities should attract uniform regulation in most cases, such activity based regulation might be less effective than entity - based regulation when one is dealing with financial activities by bigtech firms. cybersecurity risks are likely to overshadow financial risks for all. systemic risks, operational risks and risks affecting competition are of prime importance when dealing with large financial market infrastructure entities or bigtech. countries need to overcome the legislative and regulatory deficits in dealing with concerns surrounding privacy, safety and monetisation of data. regulations pertaining to data issues needs to adapt to a world where boundaries between financial and non - financial firms is getting increasingly blurred or geographical boundaries are no longer a constraint. ( bis papers no 117 33 ) 10. it is virtually impossible for legislation to keep in step with the fast mutating fintech landscape. until legislation catches up, regulation has to adapt to ensure that the financial system absorbs digital innovation in a non - disruptive manner. regulation is sometimes defined as the process of slowing down change to give time for a system to adapt and evolve. the job of the regulator is not easy when a given financial service, performed by well - regulated financial firms, changes to include non - financial firms in a constantly reconfiguring financial value chain. similarly, there are frictions for a non - financial firm to get used to financial regulation. the social benefits of a new technology or its impact on customer needs to be well understood by all stakeholders – regulators, existing financial firms as well as innovating fintech entities. slowing down the process of change, which attracts the criticism of stifling innovation – is often the best way to ensure customer protection. 11. as digitisation is promoted by public policy, the industry is often characterized by the rise of dominating entities, whether bigtech or infrastructural entities. this raises competition and concentration risks. there is no clear answer to how such issues are to be resolved – limits on market share, for example, might open up the market to new players but it could also stifle incentives to innovators. regulators also need to improvise

y v reddy : challenges and implications of basel ii for asia remarks by dr y v reddy, governor of the reserve bank of india, at the seminar on “ challenges and implications of basel ii for asia ” as a part of the asian development bank's 39th annual meeting of the board of governors, hyderabad, 3 may 2006. dr y v reddy is thankful to s / shri k. damodaran, general manager and anand sinha, executive director for the assistance provided. * * * mr. chairman and friends, i am thankful to the organisers for inviting me to participate in the annual meetings of the asian development bank and give my views on basel ii in the asian context. i have a special affinity to the city of hyderabad. i started in this city as a research scholar in 1960, then taught as a lecturer in osmania university till 1964, and later, was the collector and district magistrate of hyderabad city in 1976 - 77. again, i worked here as secretary in finance and planning department of the government of andhra pradesh for most part of the decade of 1980s. so, as a hyderabadi, i extend a warm welcome to the distinguished delegates from all over the world. basel i : voluntarism and gradualism in india let me start with basel i framework for capital adequacy, which was introduced in 1988. the basel i framework was designed to establish minimum levels of capital for internationally active banks. however, its simplicity encouraged over 100 countries across the world to not only adopt the basel i framework but also apply it across the entire banking segment without restricting it to the internationally active banks. thus, the voluntary adoption of basel i framework by several countries has made it, de facto, a globally accepted standard, though not all countries are fully compliant with all the aspects. adopting our general approach of gradualism, we in india have implemented the basel i framework with effect from 1992 - 93 which was, however, spread over three years – banks with branches abroad were required to comply fully by end march 1994 while the other banks were required to comply by end march 1996. further, india responded to the 1996 amendment to the basel i framework, which required banks to maintain capital for market risk exposures, by initially prescribing various surrogate capital charges for these risks between 2000 and 2002. these were replaced with the capital charges as required under the basel i framework in june 2004, which became effective from march 2005. we have gone a step further than the basel i