6/9  BIS central bankers' speeches  If data cannot cross borders, the digital economy cannot cross borders and we will be poorer for it. Not all data localisation is bad: there may be some legitimate concerns about national security. But a good part of data localisation that is happening in the world today is due to misguided notions of cyber security or data privacy or, worse still, old-fashioned protectionism. This is a key challenge for the technolgy community to solve together with policy makers – how to enhance data connectivity while taking into account the issues of data sovereignty. Many of the technologies do exist today: end-to-end encryption, anonymisation. Some experiments are already underway. For example, here in Singapore, UOB Bank is collaborating with Intel to test out an interesting solution. It will allow the bank’s staff in Singapore to run a federated analysis of data residing in other countries and obtain an integrated output of that analysis, without seeing any actual data. MAS and Bank of Thailand are very keen on this project and are participating as observers of the project. We need common data standards across countries so that data can flow freely in environment of trust and security. In the digital economy of future, data connectivity agreements among countries will become as important as today’s free trade agreements. Applied Research Another important element of FinTech ecosystem is applied research. Last year, MAS launched the $ million grant scheme to support R&D in AI and data analytics for the financial sector.
Responsibility would lie with the national supervisor to determine the approach most suitable for its banks. We expect that the new capital treatment will provide much better support for the healthy growth of equity financing and venture capital markets than the current Accord. 4  BIS Review 27/2001  Summary of changes and need for standards These important changes – modifying the capital charges, permitting greater recognition of collateral and trade receivables, and increasing the flexibility of the treatment of equity – should go a long way toward ensuring that banks that lend to small and medium-sized businesses are not disadvantaged under the internal ratings-based approach of the new Accord. I’d like to take a moment to speak more broadly about the internal ratings-based approach. I think it is a significant and innovative step for banks’ internal ratings to play a major role in their capital requirements – a step that plays very strongly into our goal of better aligning capital requirements and risks. To do this effectively, we need to ensure that a bank’s internal rating system enjoys an appropriate degree of credibility and consistency when used in determining regulatory capital. Accordingly, we are striving to develop a meaningful set of minimum standards. While I have focused on the first “pillar” of the new Accord, namely the minimum capital requirements, it’s important to remember that there are two other pillars vital to the new framework: supervisory review and market discipline.