Larry Thompson, DTCC Vice Chairman and General Counsel
It is only fitting that in Singapore’s 50th year of independence, the world’s premier financial services event - Sibos - returned to the Lion City this month (October). Singapore’s transformation over the last half century to the globe’s fourth largest financial center and fourth biggest foreign-exchange trading hub speaks to its evolution and growing prominence in the global financial system.
In recent years, Singapore has provided increased leadership on key industry issues, including the creation of a FinTech & Innovation Group by the Monetary Authority of Singapore (MAS), setting standards for financial regulation and regulatory cooperation, and creating a framework for sharing over-the-counter derivatives transaction data in trade repositories across jurisdictions among regulators.
These developments, along with initiatives to promote growth in private banking, commodities trading and other sectors, have laid the groundwork for a sustainable expansion of Singapore as a regional and global financial hub.
Against a backdrop of the ongoing transformation of financial markets and the advent of new technologies that are driving innovation, this year’s Sibos event enabled market participants from around the world to debate, share information and create solutions to some of the top challenges facing the firms, such as the threat of cybersecurity, the need to build resiliency to protect against interconnectedness risk and the management of entity data.
For example, we participated in a robust dialogue on the cybersecurity challenge, specifically the discrepancy between the relatively low costs to launch an attack versus the high costs of defending against them. Research suggests that a lone attacker can very cheaply acquire the tools required for an attack on the black market for under US$1000, yet an institution may need to spend more than US$1 million to successfully counter it.
One approach discussed at Sibos, and which has drawn interest and support from both the financial industry and regulators, is to employ a community defense against cybercrime. By sharing information between institutions it is possible to identify and stop attacks being made against multiple organizations.
Related: New Soltra Network Offering to Connect and Coordinate Cyber Threat Intelligence Sharing
Another topic of discussion centered on the role interconnectedness plays in the transmission of risk. The 2008 financial crisis highlighted how interconnected financial firms and markets have become and the potentially devastating consequences that can have on the financial system and end investors.
Most research completed to date has found that financial networks tend to be robust yet fragile, absorbing shocks up to a certain tipping point, and spreading risk beyond this critical threshold. While a moderate level of interconnectedness helps diversify risks, a very densely connected network may be less robust and spread shocks rather than absorb them. Understanding how to better manage this risk was a critical take-away for many.
Related: New DTCC White Paper Spotlights the Role of Interconnectedness in the Transmission of Risk
Another area of interest is the need for an industry-wide approach to help financial firms more efficiently manage their entity data in order to reduce costs and complexity while ensuring compliance with new regulatory mandates.
Firms increasingly need to collect and maintain basic information that uniquely identifies their clients in order to satisfy Know Your Customer, or KYC, mandates. This area also represents a cost and potential risk for firms – and does not provide them with a competitive advantage. Many in the industry are increasingly seeing this area as an opportunity to mutualize the collection and maintenance of entity data within an industry utility.
Singapore’s future as a financial services hub looks bright. It has proactively embraced innovation and regulatory reform to drive the sector ahead. It was indeed appropriate then that in its 50th year, Singapore played host to the world’s leading financial technology event.
This article first appeared in The Asset on October 30, 2015.