Reform evaluation, supervision, tech could shape next decade's regulatory agenda: MAS' Menon

FINANCIAL regulators could grapple with evaluating reforms, enhancing supervision and cyber risk over the next decade, Monetary Authority of Singapore (MAS) managing director Ravi Menon said this week in a speech aimed at imagining plausible future scenarios.

Speaking at the Symposium on Asian Banking and Finance held by the Federal Reserve Bank of San Francisco on Monday, Mr Menon framed his speech as an imaginary address given in 2028.

Under that scenario, the coming years to 2021 could see regulators evaluate the efficacy and impact of reforms that were enacted after the 2008 global financial crisis.

Some possible areas worth examining could be trade finance, infrastructure finance, small- and medium-enterprise finance and market liquidity, where reforms may have led to "sub-optimal social outcomes", Mr Menon suggested. Regulators looking at these areas would seek to calibrate adjustments to ease constraints without significantly increasing risk.

After that, regulators might shift towards enhancing supervision, with a focus on improving cross-border collaboration and managing the culture of risk.

It is possible, he speculated, that by 2028 regulators would have come together to establish "culture and conduct supervision" that included sharing information on errant industry professionals to deter "rolling bad apples".

Technology could also be a major part of regulatory work over the next decade. Operationally, supervisors could begin to use data analytics, sentiment assessments, and the tools of behavioural psychology to gain insights on the culture and conduct in financial institutions.

But cyber risk could also move to the forefront of the regulatory agenda of central banks globally, Mr Menon said. Setting of standards for distributed ledgers, making cloud computing services safer, and dealing with artificial intelligence will be plausible tasks for regulators in the next decade.

The challenge, he said, would be to keep the financial system stable on the one hand, while allowing the financial sector to innovate and grow, and serve the needs of the economy and society on the other.

"That means taking a proportionate approach to risk, so that we can achieve resilience with efficiency, stability with growth, safety with innovation," Mr Menon said.