MAS: Bringing compliance closer to the cloud

The Monetary Authority of Singapore (MAS) has helped dispel some of the uncertainty around outsourcing and cloud-based models in the governance, finance, risk and compliance (GFRC) context, with the inclusion of guidance on cloud computing services in its updated guidelines on managing the risks associated with outsourcing. Here Wouter Delbaere, Asia-Pacific Market Manager, Regulatory Reporting, for Wolters Kluwer’s Finance, Risk & Reporting business, explores this welcome development that should pave the way for greater adoption of these services - and hence a more efficient and cost-effective approach to GFRC - among financial institutions.

Banks in Asia are increasingly aware of the potential of cloud computing to reduce the costs and enhance the flexibility of their information technology infrastructure, and many are turning to cloud solutions in areas such as software development or customer relationship management. However, the security concerns and regulatory restrictions surrounding sensitive customer and financial data make service-based IT approaches to governance, finance, risk and compliance (GFRC) less common.

In a rising market, are banking outsourcers pulling their weight?

The Quarterly Outsourcing Index recently confirmed that outside the public sector, banks and financial institutions are by far the most prodigious users of business process and technology outsourcing. In the first quarter of 2016, the industry’s contracts totaled a whopping £324 million, up 6% on the same period last year. This comes as no surprise. Despite consumer lending continuing to rise (gross mortgage borrowing, for example, is up 64% year-on-year) many banks remain in jeopardy. In April, two of the High Street’s biggest banks reported that operating losses had more than doubled since the previous year.

Commentators are quick to point the finger at past malpractice. It’s true that some big banks are facing huge FCA-imposed fines and are burdened by high volumes of customer complaints as a result. But lenders are also being impacted by other significant factors. Changes in regulation, for example, the global economic slowdown, Brexit and the Eurozone crisis and increased competition from new players entering the market. Widespread restructuring is commonplace and, in a bid to reduce cost and enable banks to refocus internal resources on generating revenues, many are outsourcing the operational upkeep of non-core operations to third parties.

Capital markets: Buying habits signal a shift towards the cloud

62% of technology projects in capital markets over the last year have cost less than $500,000, with 45% having a Capex of less than $250,000 according to our latest research.

This came as somewhat of a surprise. 

My conversations with fintech companies serving capital markets have been consistent – times are getting better. Institutions are spending again and, although pressures are there, confidence is returning. Regulatory demands, technical upgrades and changing customer requirements were supposed to be pushing firms to spend. So, in a market widely known for major, wholesale technology change, this level of spend marks a real shift.