PwC's Managing upstream risk: Regulatory reform review - An asian perspective December 2013

1. Editorial 2013 presented an interesting year for financial services industry players as regulatory reform topped the agenda for both financial institutions and major global and regional regulators. In the first six months, aggressive reform initiatives were witnessed in the banking, insurance and asset management industries. The Financial Stability Board, in its progress report issued on 31 August 2013 mentioned that “Our work has advanced substantially, but it is not yet complete”. In the next few years, regulatory emphasis and expectations will continue to put pressure on FIs and their Boards. Standard setting agencies and regulators will increasingly determine and shape the future of the financial services industry. From an operational perspective it is also important for financial institutions to assess threats and opportunities in formulating appropriate business and compliance models. As the G20 and global regulators push for greater reform efforts and set higher standards, regulatory authorities in each country have been keeping up with the global timeline. Being “compliant-ready” is a priority especially when failure to do so may jeopardise bilateral or multilateral business ties. Regulatory reform also continues to linger as a key concern for CEO of financial institutions. This is evidenced by PwC’s global CEO survey published in January 2013 where 95 per cent of banking and capital markets CEOs said that governments and regulators influence their strategy, almost as much as customers. 4 Regulatory Reform Review | Editorial From an Asian standpoint, in 2013, key regulatory trends emerged with regional regulators rolling out policies and recommendations rapidly. In addition, the industry has also been dealing with extra territorial regulations. It is evident that countries are beginning to see the importance of regulatory reform and acting towards establishing themselves as competitors in an equal playing field and narrowing regulatory arbitrage. The various global regulatory initiatives and those undertaken by home country regulators in Asia have had spillover effects on the financial institutions’ operations. With Asia gaining growth momentum and attention as a business jurisdiction, the importance of regulatory reforms will continue in order to enhance the credibility of Asian markets which simply means that financial institutions in Asia will have to continue to be nimble to respond to such reforms. Asian nations are stepping up their efforts for reform evidenced by the following: • Anti-money laundering (AML) together with managing tax crimes risk – Strengthening the robustness of their AML framework, especially with increasing clamp-down by the Financial Action Task Force (FATF). In April, Thailand was removed from the FATF’s grey list with the Philippines not far behind. It is especially significant that countries with otherwise undeveloped legal frameworks are moving towards countering illegal activity and also a sign that these countries are ready to break away from their

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