It is also not unreasonable to expect that traditional business lines between financial services, general commerce or telecoms will increasingly be blurred – and activities may concentrate in the biggest institutions with superior competitive advantages including in the areas of talent, customer base, and customer data. The FAANGs and BATs of this world – the technology giants – come to mind. These may also have implications for financial stability. Indeed, the next systemically important institution could be a BigTech with roots in e-commerce, and therefore, whether such entities require some form of oversight by financial regulators in future. 33 With the increasing use of artificial intelligence (AI) and various forms of data analytics (DA), another area of focus will be around the governance of their use. The MAS recently released a guide that we co-created with some industry partners on a set of principles for Fairness, Ethics, Accountability and Transparency (or FEAT) in the use of “AIDA”. Whether and how the increasing use of machine-learning systems (both supervised and unsupervised), algorithms and data-driven insights can affect behaviours and decision-making in financial institutions will be a rich area for research and attention. Regulators generally like the idea of deploying smart systems that can do a better job in risk detection or risk management. But what about for business decisions or say, personnel decisions? Whether AI-driven systems will perpetuate bias and discrimination is also ripe for more extensive studies.
6 By many measures, the global banking system is more resilient. For example, compared to earlier this decade, Common Equity Tier 1 risk-weighted assets of internationally active banks stand at around 13%, from about 7% before. Their leverage ratios average about 6% now, from less than 2% previously. Implementation of post-crisis regulatory reforms 7 We should also remember that the global banking regulatory standards are minimum requirements. National supervisors can use other levers of the Basel framework to apply higher standards or additional requirements on their banks, as appropriate, based on idiosyncratic considerations. 8 There is a general consensus that the financial system is safer than before. But the followon question can be: safer, yes – but is the system safe enough? 9 To say that regulators have addressed all that can go wrong would be great hubris. Indeed, this will be contrary to the evolving and adaptive nature of financial activity. The reality is a recurrence of financial crises in economic history. I would add that no amount of regulations and supervision can prevent crises; what regulators seek to do is to reduce the likelihood and negative impact from one. This will require banking regulators to remain vigilant against emerging risks, and hence the importance of forward-looking supervision to complement regulations. 10 On the other hand, with the last global financial crisis becoming a distant shadow of sorts, there are already calls that “this time it is different” and to dial down the enhanced regulatory requirements – just as all the crises before it.