HKMA to Target Accelerated RegTech Adoption in 2021

The HKMA wants to see banks embracing and trialling new technologies and proofs of concept, and ultimately adopting more Regtech solutions, said central banker Arthur Yuen.

The HKMA (Hong Kong Monetary Authority) has published a new white paper, developed by KPMG, offering suggestions to bolster RegTech adoption in Hong Kong.

The research for the white paper was based on surveys of 133 local banks and 47 Regtech providers, conducted in July and August, as well as in-depth interviews with 70 individuals from banks, regtech firms, local and overseas regulators and other industry stakeholders.

The paper finds that one-third of the surveyed banks have fully implemented at least one Regtech solution, and that there are “significant opportunities” to encourage banks that have yet to implement Regtech – and those that have already adopted solutions – to improve implementation and expand use cases into emerging areas.

Budgetary and capability constraints, as well as the lack of available and established solutions catering to local requirements are the main adoption challenges for banks and Regtech providers, the paper says. “There is a need for targeted intervention in order to overcome these challenges.”

The paper identifies 26 specific RegTech application areas across six broad fields: Regulatory Compliance Obligations, Financial Crime, Conduct & Customer Protection, Regulatory & Tax Reporting, Risk Management, and Governance & Accountability.

Speaking at Hong Kong Fintech Week 2020 on Monday (2 November), HKMA Deputy Chief Executive Arthur Yuen said the regulator has put forward suggestions in five key financial areas, as part of Hong Kong’s aims to become a global RegTech leader by 2025, with wide application of new technologies in the banking sector.

“We believe that this white paper will encourage banks in Hong Kong to actively consider the business challenges that can be solved with Regtech,” Yuen said. “We want to see banks embracing and trialling new technologies and proofs of concept, and ultimately adopting more Regtech solutions.”

Recognising the growing importance of Regtech and the benefits RegTech can offer financial institutions, the white paper offers practical recommendations for initiatives that will contribute to the wider adoption of Regtech, and comes with a two-year roadmap of planned HKMA initiatives aimed at further promoting Regtech adoption in the Hong Kong banking sector.

Next year, the HKMA will develop a Regtech knowledge hub that acts as a central repository of all Regtech-related content and knowledge sharing for the Hong Kong banking industry.

It will also develop and roll out a “Regtech Adoption Practice Guides” series, building on – or potentially superseding – the HKMA’s “Regtech Watch” newsletter series. The new series will in part be devoted to the use of key technologies to enable Regtech adoption in Hong Kong.

In addition, a Regtech skills framework will be developed, identifying the skills required for different roles to accelerate Regtech adoption.

A RegTech Adoption Index (RAI) will also be developed, to measure banks’ Regtech adoption propensity and preparedness across four pillars – Investment, Adoption, Talent & Culture, and Impact. The RAI will cover actual adoption, intent to adopt, and key enablers for adoption.

The HKMA will also host a large-scale Regtech event and a hackcelerator-style Regtech Challenge event next year.

The full whitepaper is available here.

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