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THE Monetary Authority of Singapore (MAS), in supporting Singapore financial institutions' innovation drive, will put its first priority on strengthening cybersecurity, but will allow the industry to develop new digital services through "smart regulation", said Ravi Menon, managing director of MAS, on Monday.
MAS will commit S$225 million in funding over the next five years, with the funds available to financial institutions to build their research and development strengths in this area. This comes as Mr Menon argued that after a few "false starts", technology will transform banking.
"There is reason to believe that this time is different: that technology will indeed transform financial services in a way that has not happened before. It has much to do with the concept of mobility," he told participants at the Global Technology Law Conference in Singapore.
He noted that as more financial services are delivered over the Internet, the frequency, scale and complexity of cyber attacks on financial institutions have increased globally, and that banks must be aware of cyber threats ahead.
But "MAS is not seeking a zero-risk regime", said Mr Menon, noting that financial institutions have the room to introduce certain digital products and services without seeking MAS's approval.
"In matters of innovation, time to market is critical. Financial institutions are free to launch new ideas without first seeking MAS' endorsement, as long as they are satisfied with their own due diligence," said Mr Menon.
But he added that financial institutions' board and management are responsible in ensuring that risks of new innovations are well identified and managed.
"They should avoid second-guessing MAS by taking an overly conservative stance that might nip innovation in the bud," said Mr Menon, referring to compliance staff. "But the financial institution must offer its own assessment of the risks in what it proposes to do and take ownership for its decisions. It cannot rely on MAS to do its due diligence."
He said the regulator is prepared for "some failures" along the way.
"We understand that failure is part of the learning process. If things do go wrong with an innovative product or service, and there will no doubt be some failures, the financial institution will need to review its implementation and draw lessons," said Mr Menon.
"MAS will examine the facts to assess if there is any systemic or deeper issue that needs to be addressed, and determine if any action needs to be taken."
He said MAS will support a "FinTech ecosystem", noting that efforts to grow Singapore's ambition as a Smart Nation must go beyond the financial industry.
"MAS looks forward to engaging FinTech start-ups more actively - to better understand emerging innovations as well to help them design their solutions bearing in mind the regulations and risk considerations that apply to the financial industry," Mr Menon said.