EY+2023年全球金融服務(wù)監(jiān)管展望-13正式版

2023GlobalfinancialservicesregulatoryoutlookContents

Introduction3Geopoliticsandregulatoryfragmentation4Economicenvironmentandcustomerimpact5Digitalassets7Digitizationoffinancialservices10Environmental,socialandgovernance(ESG)12Financialcrime15Strategicagilityandoperationalresilience17Prudential18Conclusion20

IntroductionAtthebeginningof2022,itmayhaveseemedtosomeasifthefinancialservicesindustrywasthroughtheworstofthepandemicandreturningtosomethingapproachingsteady-stateoperations.However,aswenotedinour2022outlook,anumberofchallengeswerelikelytoshapethefuturelandscape.Sincethen,themacroeconomicenvironmenthassharplydeteriorated,withgeopoliticalrisks,highinflation,monetarymeasuresbycentralbanks,slowingeconomicgrowthandthepotentialforafull-blownrecessioninmanycountries.Thatallcomesontopofexistingchallenges,includingincomedisparityinmanymarkets,populismandpartisanship,rapidlyevolvingtechnologies,agreaterpushforenvironmentalsustainability,crypto-assetrisksandcyberthreats.Inall,thecomplexityoftheoperatingenvironmentforbanks,insurers,assetmanagersandotherfinancialservicesfirms—collectivelyreferredtoas“firms”fromthispointforward—isarguablygreatertodaythanatanypointinthepastfewdecades.Regulatorychangesarebothareflectionofthesechallengesandsometimesacomplicatingfactor.Inseekingtoaddressandmitigatetherisksofthisnewenvironment,regulatorscancreateanadditionallayerofcomplexityforleadershipteamsintheindustry.Atthesametime,byanticipatingregulatorychanges,firmscanunlocknewgrowthareasandreinforcecompetitiveadvantages.Thispublicationaimstohelpthoseleadersmakesenseoftheregulatorylandscapeandpotentialchangestheymayexpectinthenear-to-mediumterm.Wediscusseightaspectsoftheregulatoryenvironmentthatwebelievewillbekeyareasoffocus:GeopoliticsandregulatoryfragmentationEconomicenvironmentandcustomerimpactDigitalassetsThedigitalizationoffinancialservicesEnvironmental,socialandgovernance(ESG)FinancialcrimeStrategicagilityandoperationalresiliencePrudential22 |2023Globalfinancialservicesregulatoryoutlook 2023Globalfinancialservicesregulatoryoutlook| 3GeopoliticsEconomicandregulatoryenvironmentandfragmentationcustomerimpactRegulationisacreatureoflegislationand,byitsnature,legislationfollowswidersocietalandgeopoliticalconcerns.During2022,wehaveseenaspikeingeostrategicrisk—mostnotablyintermsofthewarinUkraineandUS-Chinatensions.Theworldisbecomingmoreconcernedwithnationalandregionalsecurity.Wehaveseenanumberofstrategicrulesandlawsproposedorpassedinrecentyearsthatareheavilyinfluencedbystrategicautonomyorwiderpoliticalconsiderations.TheseincludeEuropeanUnion(EU)third-countrybranches,financialdataprocessinglawsinIndiaandevenopposingstate-levelpoliciesregardingESGintheUS.Weseethesepressuresincreasingintheshorttermandmanifestingthemselvesindifferentways,evenwheretherearestrongargumentsandincentivesforglobalcooperation;forexample,whenaddressingclimatechangeandwhereglobalbodies,suchastheFinancialStabilityBoard(FSB)ortheInternationalOrganizationofSecuritiesCommissions(IOSCO),havesoughttoinfluencestandards.Manyoftheexamplesinthefollowingsectionsshowhowdifferentjurisdictionsareapproachingkeyissuesindifferentways.Thiscanleadtobothadditionalregulatorycostsforfirmsandgreateroperationalrisks.

Historically,globalbanksandotherfinancialservicesfirmshavebeenabletoremainlargelyneutraloninternationallysignificantordomesticallypartisanissues.Today,theyneedtoconsiderwhethertheycanaffordtooperateinalljurisdictions,frombothalegalandstakeholderperspective.Implicationsforfirmsregardinggeopoliticsandregulatoryfragmentation:Payinggreaterstrategicattentiontothedivergenceofregulationamongjurisdictionsandeffectivelymanagingthosedifferences.Assessingthechallengesthatmayinfluencewhereandhowtheyinvestoroperateinternationally.Regulationandpoliticalriskshouldbeseenaskeyfactorsinsuchdecisions,alongsidethecoreeconomicsofrunningafirm.

Aswenotedinthe2022globalregulatoryoutlook,difficulteconomiccircumstancesarepushingconductregulatorsaroundtheworldbeyondtheirpreviousfocusonfinancialinclusiontothebroaderconceptofcustomerimpact.Theyarenotjustensuringthatpeoplehavereasonablyequitableaccesstofinancialproductsandservicesbutalsoassessingtheoverallimpactofthoseofferings.Thepreciseapproachandareaoffocuswillvarybycountry.Butinmostdevelopedmarkets,theongoing—and,inmanymarkets,worsening—economicchallengeswillkeepthetopicofcustomerimpactatthetopofregulatoryagendas.Thusfar,theUKhastakenthebiggeststepsinthisdirection,withtheFinancialConductAuthority’snewConsumerDutyrules.1TheruleswerefinalizedinJuly2022andtakeeffectin2023.Theypushfirmstoshiftawayfromacompliancemindsetbasedonaclearsetofrulesandrequirementstoamoreholisticassessmentoftheoverallimpactoftheirproductsandservicesoncustomers.ThenewConsumerDutymeansthatfirmshavetocentertheirattentiononconsumeroutcomesateverystageoftheproductandservicelifecycle,resultinginastrategicreevaluationofbusinessmodelsformany.Areasoffocusincludeconsumerunderstanding,thespecificimpactofproductsandservices,consumersupport,andpriceandvalue.TheConsumerDutywillrequirefirmstoofferproductsthatarefitforpurpose,representfairvalueandfocusontheactualoutcomesthatcustomersexperience.Therulesalsointroducetheideaofsupportingandempoweringcustomersbyaddingboardchampionswithinfirmstoimpacttheirculture.

Otherjurisdictionsarebeginningtoshowinterestinsimilarrules.IntheUS,forexample,theConsumerFinancialProtectionBureau(CFPB)ispayingmoreattentiontooverdraftandinsufficient-fundfees—andparticularlythelargeshareofoverallfeevolumecomprisedbythesetwocategories.2TheCanadiangovernmentintroducedsweepingconsumerprotectionreformthatcameintoeffectin2022.Amongthenewrequirementsareconsiderationofwhetheraretailbankingproductisappropriateandmandatorynamingforfirmsfoundinviolationoftheserequirements.3Australiaimplementedproductdesignanddistributionobligations(DDO)inOctober2021whichaimtosupportbetterconsumeroutcomes.4Conversely,regulatorsinotherjurisdictions,primarilyinAsia-Pacific(APAC),arestillfocusedonthebaselinegoalofinclusionandthedigitizationoffinancialservices.InHongKong,forexample,thedutytoactfairlyandinthebestinterestsofcustomersessentiallyincorporatesthisnotion,butHongKongregulatorshavenotyetarticulatedtheConsumerDutyasexplicitlyastheUKFCA.Smallandmediumenterprises(SMEs)areanotherareainwhichregulatorsarepayingcloseattention—particularlyasgovernmentCOVID-19supportsarestartingtowinddown.IntheUS,mostofthePaycheckProtectionProgramloanswereconvertedtograntsandforgiven(providedsmallfirmsmetasetofcriteria).However,inothermarkets,thosekindsofsupportloanshavebeenrepeatedlyrolledoverandarestillpending—withanunclearoutcome.4 |2023Globalfinancialservicesregulatoryoutlook

“ConsumerDuty,”FCA.org,.uk/firms/consumer-duty,accessedDecember22,2022.“CFPBResearchShowsBanks’DeepDependenceonOverdraftFees,”CFPB,https:///about-us/newsroom/cfpb-research-shows-banks-deep-dependence-on-overdraft-fees/,December1,2021.“TheFinancialConsumerProtectionFramework,”https://www.canada.ca/en/financial-consumer-agency/services/banking/rights-new-protections/consumer-protection-framework.html,accessedDecember22,2022.“Designanddistributionobligations,”ASIC.gov,.au/regulatory-resources/financial-services/financial-advice/your-obligations-when-giving-financial-advice/design-and-distribution-obligations/,accessedDecember22,2022.2023Globalfinancialservicesregulatoryoutlook| 5Insomejurisdictions,regulatorshavesentanexplicitsignalthattheyareconcernedabouttheimpactofbankactionsonSMEs,oftenthrough“DearCEO”letterstobankingleadershipteams.Forexample,inJuly2022,theUKFCAidentifiedseveralissues(e.g.,unaffordablepaymentplansandalackofclearpoliciestoidentifyvulnerablecustomersordetectunfairtreatment)andremindedbanksina“DearChair”lettertoensurefairtreatmentofSMEcustomersduringcollectionsandrecoveries.

DigitalassetsImperativesforfirmsregardingcustomerimpactinclude:?Emphasizingthebalancebetweentheresponsibilitytoshareholdersandtreatmentofcustomers—particularlyretailcustomersandsmallfirms.?Evolvingbeyondastrict,box-tickingmindsetofcompliance,andinsteadassessingthebroaderstrategicimplicationsoftheirproductsandservices.66 Theoversightofdigitalassets,includingstablecoinsandothercrypto-assets,continuestoevolve.However,itwilltaketimetoestablishtherightlevelofregulatoryclarityandbalancetheopportunitiesfromdigitalassets(e.g.,financialinclusion,resiliencyandcost-reduction)withthepotentialdownsiderisks.Atthesametime,thespectacularcollapseofoneofthebiggestandreputedlymostregulation-mindedvirtualassetexchangesforallegedfailuresinriskmanagement,misuseofclientassets,poorcreditriskandconflictsofinterestmayobligeregulatorsandpolicymakerstointervene.Further,theplungeinthepriceofmostcrypto-assetsin2022showsthescopeofmostrisksandthelikelyneedtotakesignificantstepstoprotectinvestors.Still,somefirmshavealreadyimplementedtargeteddigitalassetstrategiesduetoincreasedcustomerinterest,buttheyaredoingsocautiously.5Policymakersaresensitivetoregulation—over-regulatingmayhamperinnovation,whileunder-regulatingleadstomarketinstabilityandleavescustomersunprotected.Forregulators,interveningwithoutasufficientunderstandingofthemarketsorpowerstopolicethemalsocarriespoliticalrisk.Theprincipalchallengeforregulatorsandestablishedfirmsisunderstandingthenuancesanddistinctionsbetweencryptoandwiderdigitalassetsandensuringtheycanfosterthevalueofthesedevelopments,whileavoiding(bothpositiveandnegative)sentimentandeconomicharm.Therecentdigitalassetintermediaryturmoilandallegationsmayhavesignificantlytippedthedebateinfavorofstringentregulation.TheEUhastakenasteptowardregulatoryclarityfordigitalassets,withaprovisionalagreementonaMarketsinCrypto-Assets(MiCA)proposalthatwillstandardizerulesforcrypto-assets,crypto-assetissuersandcrypto-assetserviceprovidersacrosstheEU.6Amongotherprovisions,MiCAincludesprotectionsforcustomers’wallets,anti-fraudmeasuresandone-to-onereservesforstablecoins.TheMonetaryAuthorityKummer,Katieetal,“Whatactionscandriveresponsibleinnovationindigitalassets?”,EY.com,/en_gl/public-policy/what-actions-can-drive-responsible-innovation-in-digital-assets,September-30,2022.“Digitalfinance:agreementreachedonEuropeancrypto-assetsregulation(MiCA)”,CounciloftheEU,https://www.consilium.europa.eu/en/press/press-releases/2022/06/30/digital-finance-agreement-reached-on-european-crypto-assets-regulation-mica/,accessedDecember-22,2022.

ofSingapore(MAS)alsoprovidedclarity,butnotthetypethatcryptoprovidersmayhaveanticipated;itissuedguidelinestolimitthepromotionofcryptotoSingaporeresidents.7MASissuedtwomoreconsultationpaperstomoretightlyregulatecryptoexchangesandstablecoins:MASproposesmeasurestoreduceriskstoconsumersfromcryptocurrencytradingandenhancestandardsofstablecoin-relatedactivities.IntheUS,severalbillsaremovingthroughCongresswiththegoalofcreatingacomprehensivepolicyframeworkfordigitalassets,thoughtheyfaceanunclearpathforwardinthecurrentpoliticalenvironment.AmorelikelydirectionoftravelintheUSisthatregulatorswillprovideoversightusingexistingpolicies,undertheprincipleof“sameactivities,samerisks,samerulesandsamesupervision.”8TheFinancialStabilityBoard(FSB)recentlyproposedaframeworkwiththesameunderlyinglogic.9TheUSOfficeoftheComptrolleroftheCurrency,whichoverseesnationalcharteredbanks,hasonlyauthorizedspecificallyprescribedtypesofactivityfordigitalassets:reservesforstablecoins,participatinginnodesforvalidationandcustodyofdigitalassets.Wenotethatfewnationalbanksareactivelypursuingcrypto-relatedbusinesses.TheCommodityFuturesTradingCommission(CFTC)isaskingfortheauthoritytoregulatespotmarkets,whichiscurrentlyaholeintheregulatoryperimeter.Similarly,regulatorsarestillwatchingandwaitingintermsofhowtheyaregoingtoregulatethecryptoexchanges.Thecollapseofoneoftheworld’smostpopularcryptoexchangesinNovember2022islikelytoopenadebateabouttighter“MASIssuesGuidelinestoDiscourageCryptocurrencyTradingbyGeneralPublic,”MAS.gov,.sg/news/media-releases/2022/mas-issues-guidelines-to-discourage-cryptocurrency-trading-by-general-public,accessedDecember22,2022.“StatementonFinancialStabilityOversightCouncil’sReportonDigitalAssetFinancialStabilityRisksandRegulationBeforetheFinancialStabilityOversightCouncilOpenMeeting,”SEC.gov,/news/speech/gensler-statement-fsoc-meeting-100322,October3,2022.“FSBproposesframeworkfortheinternationalregulationofcrypto-assetactivities,”FSB.org,/2022/10/fsb-proposes-framework-for-the-international-regulation-of-crypto-asset-activities/,October11,2022.2023Globalfinancialservicesregulatoryoutlook| 7regulationfordigitalassetexchanges.BothHongKongandSingaporeareconsideringthetighterregulationofvirtualassetserviceproviders(VASPs).Specifically,HongKongwillprohibittheofferingofcryptoservicestoretailinvestors,andtheSecuritiesandFuturesCommission(SFC)issuedacircularthatwouldrestrictcryptoprovidersfromofferingvirtualasset-relatedproductstoretailinvestors.Oneareaofgrowingclarityistheregulatoryrequirementsforstablecoins.Althoughthereissomequestionaroundwhichtypesofinstitutionscanissuestablecoins—banks,non-banks,otherindustryparticipants—thereisgrowing

ThestateofCBDCsinmajorfinancialmarketsEurozone:TheEuropeanCentralBankandthenationcentralbanksoftheeuroareaareinatwo-yearinvestigationphaseofthedigitaleuro,lookingatissuesregardingdesignanddistribution.TheEuroRetailPaymentsBoard(ERPB)isallowingmarketparticipants,includingbanks,paymentserviceproviders,consumerrepresentativesandmerchants,toprovidetheirviewsonadigitaleuro.14

CBDCsintroducearangeofchallenges,includingmajor happenthroughthebankingsystem,withtransactionsrecordedquestions,suchasmonetarypolicyandprivacy.InmostG20 bythecentralbank.Thegovernmentwoulddevelopabase-countries,therearealsoconsiderationsofthetypeofCBDC layerplatformandbankswouldbeabletoinnovateandcreate(wholesale,retailorhybrid)andtheinteractionwiththeprivate applicationsbuiltonthatplatform.sector.Atahighlevel,allcustomerinteractionswouldstillagreementthattheyshouldbe100%backedbyfiatcurrency,resultingingreatertransparencyanddisclosure.Forexample,theHongKongMonetaryAuthority(HKMA)issuedadiscussionpaperfortheregulationofstablecoins,indicatingapolicyintentiontoregulatepartiesinvolvedinmaterialstepsinthelifecycleofastablecoin.10Beyondthat,moredistinctsignalsarecomingviaenforcementactions,whereregulatorsareapplyingthelensofsafetyandsoundnessofthefinancialsystemtogoafterhigh-profiletargets.Forexample,severalcelebritieswhopitchedcyber-assetsareunderscrutinybytheSECfornotdisclosingcompensation.11Similarly,theSECislookingatnonfungibletokensfromhigh-profilecryptocompaniesandconsideringwhethertheyshouldbe

China:ChinaisamongthefurthestalongindevelopingaCBDC.AsofAugust2022,transactionsusingthedigitalyuan,ore-CNY,surpassed100byuan(US$13.9b),across360mtransactionsinpilotareasin15provincesandmunicipalities.Morethan5.6millionmerchantscouldnowacceptpaymentswiththedigitalcurrency.Thegovernmentisconsideringlinkingittothecountry’stwobiggestpaymentplatforms,Tencent’sWeChatPayandAlipay,runbyAlibabaaffiliateAntGroup.15Cross-borderinAPAC:Inlate2022,HKMA,theBankforInternationalSettlementsInnovationHub(BISIH),HongKongCentre,theBankofThailand,theDigitalCurrencyInstituteofthePeople’sBankofChinaandtheCentralBankoftheUnitedArabEmirates,published

WholesaleCBDCs

Usagerestrictedtopermittedinstitutionsasasettlementassetforlargebusinesstransactions(e.g.,wholesaleinterbankpayments,securitiessettlementsandpaymentsbetweenlargecorporations).Seenaslessofapriorityglobally,whichisreflectedinongoingprojects.3

RetailCBDCs

Widelyaccessibleretailversionsavailabletothegeneralpublic(householdsandbusinessesoutsidethefinancialsector)thatsubstituteorcomplementbanknotesincirculation.Emerging-marketanddevelopingeconomieshavestrongermotivationsforissuingCBDCsduetofinancialinclusionfactors.treatedasfinancialsecurities—andsubjecttothesamerules.12Cryptostartupshavecriticizedregulatorsforthisapproach,deemingit“policymakingthroughenforcementaction.”But,intheabsenceofexplicitrulesaboutemergingdigitalassets,suchactionsarelikelytocontinue,andregulatorswillseektoprotectthepublicbyapplyingrulesinlinewiththeFSB’s“samerisk”approach.However,withoutsometailoringofrules,theremaybeunintendedconsequencesdrivingitemsofvaluefromthemarketandleavingitdominatedbyworthlesstokens.Giventhisincreasednumberofregulationsoncrypto-assetsacrossjurisdictions,theFSBinOctober2022proposedaframeworkfortheinternationalregulationofcrypto-assetactivities.13Itaimstoreducetheriskofregulatoryfragmentationandarbitrageandincludesrecommendationsontheregulationofglobalstablecoinarrangements.Centralbankdigitalcurrencies(CBDCs)areanotherrapidlyevolvingarea.MostgovernmentsarenotclosetoissuingaCBDC,withahandfulofexceptions,butweseegrowinginterestinthisfromcentralbanksaroundtheworld.“DiscussionPaperonCrypto-assetsandStablecoins,”HKMA.gov-,.hk/eng/news-and-media/press-releases/2022/01/20220112-3/,January12,2022.“SECChargesKimKardashianforUnlawfullyToutingCryptoSecurity,”SEC.gov,https:///news/press-release/2022-183,October3,2022.Kharif,OlgaandPan,David,“BoredApeMetaverseFrenzyRaisesMillions,CrashesEthereum,”B,/news/articles/2022-05-01/bored-ape-metaverse-frenzy-raises-millions-disrupts-ethereum?leadSource=uverify%20wall,May1,2022.“InternationalRegulationofCrypto-assetActivities,”FSB.org,/wp-content/uploads/P111022-2.pdf,accessedOctober11,2022.theresultsofapilotcalled“ProjectmBridge.”Aspartofthesix-weekpilot,20banksinfourjurisdictionsconductedmorethan160paymentandforeignexchangetransactionstotalingmorethanHK$171m—oneofthefirstmulti-CBDCprojectstosettlecross-bordertransactionsforcorporates.16InSingapore,theMASisworkingonasimilarcross-borderCBDCinitiative.17US:TheUSlagsmostgovernmentsintermsofCBDCs,althoughthereisaprivately-run“DigitalDollar”project.InNovember,theNewYorkInnovationCenter,partoftheFederalReserveBankofNewYork,announcedaproof-of-conceptprojecttoexplorethefeasibilityofaninteroperablenetwork,includingbothcentralbankwholesaledigitalmoneyandcommercialbankdigitalmoney,throughdistributedledgers.18https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.degov220929.en.pdf?8eec0678b57e98372a7ae6b59047604bKharpal,Arjun,“Chinaispushingforbroaderuseofitsdigitalcurrency,”CNBC.com,/2022/01/11/china-digital-yuan-pboc-to-expand-e-cny-use-but-challenges-remain.html,January11,2022.“ProjectmBridge:SuccessfulCBDCprojectforreal-valuecross-borderpaymentandforeignexchangetransactions,”HKMA.gov,.hk/eng/news-and-media/press-releases/2022/10/20221026-3/,October26,2022.“MASLaunchesExpandedInitiativetoAdvanceCross-BorderConnectivityinWholesaleCBDCs,”MAS.gov,.sg/news/media-releases/2022/mas-launches-expanded-initiative-to-advance-cross-border-connectivity-in-wholesale-cbdcs,November3,2022./aboutthefed/nyic/facilitating-wholesale-digitalassetsettlement

TherisksandopportunitiesthatCBDCspresenttofirmsdependcruciallyonthepolicyobjectivesandrequisitedesignchoices.Forexample,wholesaleCBDCscouldincreaseefficiencybyreleasingliquidityamongbankingoperationsandavoidmanyofthechallengesassociatedwithretailCBDCs.Eachfeatureortechnologicaldetailcomeswithimplicitpolicytrade-offsandrequiresspecificattention.

Implicationsforfirmsregardingdigitalassetsinclude:Traditionalfinancefirmsmustdecidehowandwhytoengageprudentlywithdigitalassets,includingCBDCs,inamannerconsistentwiththeirriskandcomplianceframeworks.Cryptonativesmustdeterminehowtoadapttheiroperatingmodelstoaddressrisksthataretopofmindforpolicymakers,aswellaslikelynewregulations.8 |2023Globalfinancialservicesregulatoryoutlook

2023Globalfinancialservicesregulatoryoutlook| 9Digitizationoffinancialservices

Non-bankentrants,suchastechnologyfirmsandFinTechplayers,aredrivingdigitizationinthefinancialservicessectorinareassuchaslending,assetmanagementandinsuranceservices.Atthesametime,financialfirmshaveincreasedtheirrelianceontechfirmstoeitherhostcoreITsystems(suchascloud-basedservicestoimproveefficiencyandsecurity)ortomakeuseoftheirdeepexperiencewithbigdata,machinelearning,AIandotheradvances.Thisexpansionoftechfirmsintofinancialservicesandtheirinterconnectednesswiththefinancialsectoriscreatingnewchannelsofrisks.AccordingtotheInternationalMonetaryFund(IMF),regulatorsmay:a)applyahybridapproach,consistingofentity-andactivity-basedregulationsoncetheregulatoryperimeterisexpandedtoincludebigtechfirms;b)increasedisclosurerequirementsfortheseDigitalinnovationcontinuestoreshapethefinancialservicessector,withthepaceandscaleoftechnologicalchangeonlylikelytoincreaseduetofactorssuchasartificialintelligence(AI),cloudandthemarketentryofnew,non-bankplayersofferingbank-likeservices,suchasretailpayments.RegardingAI,thereisaclearacknowledgmentofthepotentialforconsumerharmbutlittleinthewayofregulatoryclarityabouthowtomitigateit.IntheUS,CongressintroducedabillcalledtheAlgorithmicAccountabilityActthatwouldapplytocompaniesinallindustries—withbanksandinsurersashigher-profiletargets—toassessautomateddecisiontechnologiesforbiasandotherfactors.EnforcementwouldhappenthroughtheFederalTradeCommission,19butthebillwilllikelynotadvancetolaw.Similarly,theEuropeanParliamentisconsideringtheEU’sAIAct,whichagainlooksatallindustriesbuthasspecificimplicationsforfinancialservicecompanies.High-riskactivities,suchasAIsystemsusedtoassesscreditworthinessorestablishcreditrecords,wouldhavemandatoryrequirements,includingkeepingdecisionlogs.20SeveralEUmember-stateshaveofferedopinionsandamendmentsontheAct,whichwillbecomelawoncetheEuropeanParliamentandCouncilagreeonacommonversion.IntheUK,theBankofEnglandandFCAarerunningajointconsultationonAIandethics.

Intheabsenceofnewlegislationordirectives,mostregulatorsareapplyingtheconceptof“samerulesforsamerisks”andseekingtoregulatebankandnontraditionalmarketentrantconductthathappensthroughthetechnology,ratherthanthetechnologyitself.And,mostlargebanksareembeddingtheuniquerisksfromAIintotheirestablishedpracticesaroundmodelriskmanagementandmodelgovernance.Theregulationofcloudmigrationisfollowingasimilarpath.Inmostjurisdictions,therearefewspecificrequirementsaboutcloud.Existingregulationsinareassuchasresiliency,businesscontinuityandcybersecuritytheoreticallycovercloud,butthoserequirementsaregeneralandnotspecifictocloudtechnology,whichcouldintroducenewvulnerabilitiesandrisks.HongKongisanotableexception,wheretheHKMAhasintroducedacircularoncloudadoptionbybanks.21Somebankshavebeensanctionedorfinedbecausetheyofferedcloudserviceswithouttherightcontrolsoroversight,andtheyarenowhavingtoretrofitsomeofthoseontocloudinfrastructures—acostlyandunwieldyprocess.Similarly,applyingAIormachinelearningtoestablished,analogmodelswithoutthinkingthroughtheramificationswillnotonlyreplicaterisksbutlikelyexacerbatethem.Astechnologiesevolveandbankscontinuetodevelopnewofferings,asmarterapproachistoembedcontrolsandoversightintonewsolutionsfromthestart,aconceptknownasriskmanagementbydesign.

firms(forexample,ontherisksofbusinessactivities,suchaslending,consumerrisksorfirmobligations);orc)setupcodesofconducttoaddressspill-overrisksfromunregulatedactivities.Whicheverapproachistaken,globalconsistencyinthetreatmentofbigtechnologyfirmswillbeessential.Asidefromtheimplicationsofnewertechnologies,certainproductareasarelikelytobesubjecttofurtherchangeanddisruption.Attheforefrontofthesearepayments.AlthoughpaymentshavebeenaleadingareaofFinTechchange,paymentsmarketsgloballyarelikelytoexperiencemorechange.22Forexample,theEU’spaymentsmarketremainstoasignificantdegree,fragmentedalongnationalborders,asmostdomesticpaymentsolutionsarebasedoncardsorinstantpayments.ThereisalsoaneedforacleargovernanceframeworktosupporttheEU’sretailpaymentsmarket,andwecanexpecttheEuropeanC