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Headline Verdana Bold Comparison of Regulatory Requirements for Digital Banks
Development of Digital Banking License Framework in Asia Pacific
To date, South Korea’s
Financial Services
Committee (FSC) has
issued up to 2 digital
banking license
South Korea
Financial Supervisory Committee (FSC)
issued the virtual banking license
requirements in April 2018 . As of July
Taiwan
2019, FSC has issued up to 3 digital
Hong Kong Monetary Authority (HKMA)
banking licenses.
published the Guidelines on
Authorisation of Virtual Banks on 30 May
2018. To date, HKMA has issued up to 8
Hong Kong digital banking licenses
Bank Negara Malaysia (BNM)
issued the Digital Banking
Monetary Authority of Singapore (MAS) License Framework Exposure
announced the notice on issuance of the Draft on 27 Dec 2019.
Malaysia
digital banking licenses on 28 June 2019. All
applications are to be submitted by 31 Singapore
December 2019 and announcements of
Indonesia
successful applicants will be made mid-2020. Australian Prudential Regulatory
Authority (APRA) introduced the
Australia
new “restricted” accreditation for
new retail Banks in May 2018 and
To date, the Indonesian Financial Services granted its first license to Volt
Authority (OJK), has only issued the Bank Ltd.
guidelines to manage provisions of digital
banking services by commercial banks
© 2020 Deloitte Risk Advisory Sdn Bhd
through its recently issued regulation
POJK 12/2018, effective 8 August 2018 2Comparison of Regulatory Requirements for Digital Banks (1/4)
Topic Area Malaysia Singapore Hong Kong Taiwan
License Only 1 type of license 2 types – digital full bank and Only 1 type of license Only 1 type of license
type digital wholesale bank
Number of May issue up to 5 digital licenses Limited number – up to 2 digital No specified limit. 8 licenses Initially only 2 licenses were
licenses full bank license and up to 3 granted. available, but 3 licenses were
digital wholesale bank license eventually granted
Policy 1. To offer banking products 1. Financing growth 1. Promote application of 1. Increase customer
objectives and services to address enterprises and SMEs fintech and innovation convenience and meet
market gaps in the 2. Reducing costs and 2. Offer new customer customer needs
underserved and unserved improving convenience for experience 2. Promote financial inclusion
segments consumers 3. Promote financial inclusion, 3. Promote financial innovation
2. Promote easier and covering retail and SME and fintech
3. Helping people to plan
affordable access to financial segments
early and achieve financial
solutions
security in their later years
3. Create strong value
propositions of financial 4. Creating good jobs
system stability without 5. Financing the growth of
jeopardising depositors’ infrastructure in emerging
interest Asia, and increase of
climate-resilient, low-
carbon investments
© 2020 Deloitte Risk Advisory Sdn Bhd
3Comparison of Regulatory Requirements for Digital Banks (2/4)
Topic Area Malaysia Singapore Hong Kong Taiwan
Assessment 1. Operational readiness on N/A 1. Sufficient financial, technology and 1. Financial capability (10%)
organisational structure, policies, other relevant resources to operate a 2. Suitability of controllers and
criteria procedures and controls, virtual bank management (20%)
compliance management 2. Credible and viable business plan 3. Business model (40%)
framework, IT and accounting
3. Provide new customer experience 4. Management model (30%)
systems and BCP
and promote financial inclusion and
2. Provide a comprehensive 5-year fintech development
business plan that includes
4. Appropriate IT platform to support
financial, managerial and
their business plan
organisational resources to support
business strategy and continuity 5. Ready to commence operation soon
plan after a licence is granted
3. Required to obtain independent
external assurance to validate the
business plan
Capital/ Minimum paid-up capital of RM100 Digital full banks: Paid-up capital Paid-up capital similar to other Paid-up capital similar to other
million (SGD 33 million) during the similar to other full banks of SGD 1.5 commercial banks of HKD 300 million commercial banks of TWD 10 billion (SGD
Finance foundational phase, and shall achieve a billion; but concessionary level of SGD (SGD 53 million). 440 million).
minimum capital fund of RM300 million 15 million during initial 1-2 years to be
(SGD 99 million) at the end of the fifth progressively raised to SGD 1.5 billion.
Banks should be public companies within
year Digital wholesale banks: Paid-up one year after establishment.
capital of SGD 100 million.
Risk focus Capital Adequacy Requirements, N/A Technology, liquidity, operational (data Liquidity contingency plan, data quality
Liquidity, and Pillar 3 Disclosures, protection) and reputation risks. and credit scoring models, data
Consumer Protection, AML/CFT, and protection, contingency plans for
Recovery Plan negative news/rumours, corporate
governance, no destructive competition,
consumer protection.
© 2020 Deloitte Risk Advisory Sdn Bhd
4Comparison of Regulatory Requirements for Digital Banks (3/4)
Topic Area Malaysia Singapore Hong Kong Taiwan
Sponsors • An aggregate interest in shares of • Non-bank sponsors must have track • Digital bank should be locally- • At least 40% of shares in digital bank
more than 50% or exercise control record in technology or e-commerce incorporated. to be held by licensed financial
over the proposed licensed person • Applicant must be headquartered in • Sponsors can be financial or non- institutions, of which more than 25%
• Sponsor should be an existing licensed Singapore and controlled by financial firms. to be held by a single licensed financial
person under FSA or IFSA Singaporeans. Control is presumed if institution.
• Holder of more than 50% of digital
• A financial holding company approved the Singaporean and his related bank should be a bank or financial • Foreign financial institutions can be
under the FSA or IFSA parties own the largest shareholding institution supervised by recognised sponsors, provided they have approval
and have management control of the financial supervisor. If digital bank is of home supervisors to establish
• A foreign institution regulated by a
applicant. not held by such an entity, it should be digital bank.
supervisory authority outside Malaysia
which exercises functions • Foreign companies can partner held by an intermediate holding • If sponsors are from Fintech, e-
corresponding to those of the Bank Singapore companies to form joint company that is subject to HKMA commerce or telecom industry, they
under the FSA or IFSA venture that meet headquarter and supervisory conditions (capital must propose a successful business
control requirements. adequacy, liquidity, large exposures, and operation model and hold more
intra-group exposures, group than 10% of shares in digital bank.
structure, activities undertaken, risk • As a bank needs to hold 25% of the
management, fitness and propriety of equity, the limit on the bank partner
directors and senior management, undertaking similar banking business
reporting). through another entity is lifted if its
• Sponsors must be committed to shareholding in the digital bank is
provide strong financial, technology above a prescribed limit.
and other support to digital bank.
Directors N/A Majority of directors must be N/A Majority of directors must have
Singaporean or Singapore PR. qualifications from banks and fintech/e-
commerce/telecom industry, of which at
least 1 director must have fintech/e-
commerce/telecom experience.
© 2020 Deloitte Risk Advisory Sdn Bhd
5Comparison of Regulatory Requirements for Digital Banks (4/4)
Topic Area Malaysia Singapore Hong Kong Taiwan
Business Required to establish a sole registered Only 1 physical place of business. No Must maintain a physical place of Can have a head office and customer
office and may enter into the Shared ATMs or cash deposit machines. Allowed business in Hong Kong to deal with service centre but no branches.
Locations ATM Network and provide servicing via to offer cashback services through point customer queries/complaints, but not
an agent. of sale terminals at retail merchants. expected to establish physical branches.
Not allowed to establish physical
branches.
Fee No fee restrictions. No minimum account balance or fall No minimum account balance N/A
below fees. requirement or low-balance fees.
Restrictions
Business Total size of assets do not exceed the Digital full banks: Sources of deposit, No restrictions No restrictions
RM2 billion (SGD 660 million) at all aggregate amount of deposits and
Restrictions times during the foundational phase. amount of deposit per individual retail
No asset size limitation thereafter. depositor is limited during initial 1-2
years. Also, can only offer simple credit
and investment products during this
period. Limits will be lifted progressively
taking into account risk management and
business performance of the bank.
Digital wholesale banks: Same as per
other wholesale banks, i.e. cannot accept
deposits from individuals unless they are
fixed deposits of more than SGD 250,000.
Exit Plan Required Required Required Required
© 2020 Deloitte Risk Advisory Sdn Bhd
65 critical success factors for a digital bank licence application
In order to successfully navigate the application process and prepare for the journey
through the phases of the digital full bank sandbox, we believe a Framework should cover
the following components.
1. Strategy & Business Plan
Technology & Credible business plan that includes the bank’s proposed scope of activities,
Organisational
Structure &
Operations analysis of target markets, products and services, delivery channels, expected
Governance customer base and viable exit plan to facilitate an orderly wind up if needed
Treasury & Financial
2. Organisational Structure & Governance
Management Sound organisational and governance structures; profiles of key personnel
(directors, management and shareholders) showcasing competence, integrity and
sound financial standing
3. Technology & Operations
State-of-the-art technology infrastructure and efficient operations to support the
strategic and financial aspirations
4. Treasury & Financial Management
Details of funding channels and financial projections (e.g. cost-to-income ratio,
net interest margin) with clear path to profitability whilst meeting prudential
requirements on an ongoing basis
5. Regulatory Compliance & Risk Management
Digital Bank Robust frameworks, policies, procedures and controls to ensure ongoing
identification, measurement, communication, monitoring and management of
risks and ongoing regulatory compliance
© 2020 Deloitte Risk Advisory Sdn Bhd
7Justin Ong
Partner, FSI
+60 3 7610 8895
keaong@deloitte.com
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