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Why RegTech will be Asian banks’ next big focus area

Nurdianah Md Nur | May 8, 2017
Experts from KPMG, Deloitte and Hitachi Data Systems share why now is the right time for financial institutions to experiment and adopt RegTech, and how to do so.

time to comply clock
Credit: StuartMiles from FreerangeStock

Complying with regulations is not only challenging, but also costly, especially for banks.

Bain & Company estimates that governance, risk and compliance costs account for 15 to 20 percent of the total operating cost for most major banks globally in 2016. A LexisNexis Risk Solution study last year also found that financial institutions in China, Hong Kong, Singapore, Malaysia, Indonesia and Thailand are conservatively spending an estimated US$1.5 billion on anti-money laundering (AML) compliance alone.

One way of reducing such costs is to leverage regulatory technology (RegTech) to "automate mundane compliance tasks [such as reporting] and improve the efficiency of such activities," Craig Davis (pictured below), Asia Pacific Head of Financial Risk Management, KPMG in Singapore, told Bank IT Asia.

Craig Davis, Asia Pacific Head of Financial Risk Management, KPMG in Singapore

He explained that compliance reporting in most banks is still very much a manual process. "The spreadsheet culture is [still] big within most banks when it comes to compliance. They will take information from legacy platforms, and manipulate that data in spreadsheets. While this gets the job done, it is costly, fragmented and manual, which increases the chances of error."

Automating such processes using RegTech thus allows banks to redeploy fewer, highly-skilled compliance manpower away from routine processes, and towards analysing output and applying critical judgment to machine reporting.

 

Enabling banks to be agile

As banks transform themselves for the digital era, regulations need to change accordingly. This poses a problem for traditional compliance solutions as they are usually inflexible and designed to deliver only specified and locked down requirements.

RegTech solutions counter the shortcomings of traditional solutions by using advanced analytics and assessment techniques to learn and support the assessment of new and emerging regulations based on what has been previously done, according to Deloitte.

"Solutions today are more agile, relying on robust data amalgamations, combining diverse and apparently unrelated operational data in the search for more comprehensive and reliable regulatory compliance answers," Tim Phillipps (pictured below), APAC Financial Crime Network Leader and SEA Forensic Partner, Deloitte, shared with Bank IT Asia.    

Tim Phillipps, APAC Financial Crime Network Leader and SEA Forensic Partner, Deloitte

Since RegTech can help banks slice and dice information as and when required, such tools can also "contribute to revenue generation and creating market opportunities," Phillipps added. "RegTech allows banks to experiment with data and make it available across the broader organisation - from customer relationship manager to the compliance leader." For instance, RegTech can enable banks to leverage relevant data from multiple sources for better customer credit analysis and underwriting of small business loans.

 

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