Banks eyeing fintechs find some rules clearer than others

Singapore

BANKS and financial-technology companies (fintechs) may snuggle up in the years ahead, but banks will not be getting away with doling out riskier loans from tie-ups with less-regulated start-ups.

Existing rules will apply to ensure that there is no room for capital arbitrage when a bank acquires a fintech that provides lending and funding to smaller firms, regulatory and banking sources told The Business Times; but other regulatory questions regarding fintechs may still need clearing up.

Banks are held to strict regulatory standards which require them to hold a proportionate amount of capital determined by the risk level of their assets such as loans, and by the capital ratio. The capital ratio is set mainly through the Basel III framework, though Singapore attaches standards higher than that prescribed by the global body. Banks then fiddle with the numerator - the…