Contrary to what we saw during the debt crisis of the 1980s, the problems in Asia were not almost exclusively macroeconomic in nature; even if these countries suffered, all of them, from some deficiencies in this respect, by and large they had long track records of successful economic management. Rather, in a context dramatically changed by a major realignment between the dollar and the yen, and important differences in short-term yields, three other factors helped trigger the crisis: • •  the weakness of their public and private banking and financial structures; an unsustainable accumulation of short-term financing - particularly of interbank lending, which Alan Greenspan refers to as the Achilles’ heel of the BIS Review 43/1998  -2-  •  international financial system - which made countries particularly vulnerable to a sudden shift in market sentiment. and, last but not least, deep-seated problems of governance, corruption, and what US commentators call “crony capitalism”. Together with the macroeconomic problems, these three major factors had to be addressed for our response to the crisis to be pertinent. If you examine our programs with Thailand, Korea, and Indonesia, you will see that we have tried to deal with these factors, and they will have to be taken into consideration in the future in whatever efforts are undertaken to avoid the recurrence of crises. But even that will not suffice.
But as expected, there are also challenges that come with fintech expansion: cyber-attacks, phishing emails and other scams are reportedly on the rise, a trend that needs to be addressed before it becomes alarming. Banks must continue to stay ahead of fraudsters through constant building and rebuilding of defences, rigorous stress testing, and educating customers about cyber safety. The enhanced Cybersecurity Fortification Initiative, soon to be launched, should provide banks with a robust framework for managing the risks. 11. Growing reliance on data analytics raises questions about data ownership and privacy. As we have seen in some other jurisdictions, AI and machine learning also introduce the risk of discrimination, sometimes in hidden forms. Banks have to guard against this by ensuring ethical, fair and transparent treatment of customers, and by correcting model aberrations using human intuition. 12. We realise that banks are at different stages in their adoption of AI technologies. For this reason, our risk management approach as a regulator is based on high-level principles rather than on detailed prescriptions that might stifle innovation or be disproportionate to the risks involved. 13. Technology is not just about banks and their customers – it is also an important part of banks’ relationship with the HKMA. As we are a key part of the technology ecosystem, our aim is to add value by facilitating the industry’s technology adoption through a range of initiatives, such as the AML/CFT Regtech Forum and the Regtech Watch newsletter.