Regulators need to increase their scrutiny of non-bank firms that are moving into the financial business, according to the chief executive officer of DBS Group Holdings Ltd., Southeast Asia’s largest lender.
“Absolutely,” Piyush Gupta said when asked at a Bloomberg forum in Singapore whether more regulation is needed for technology and other firms that are competing with traditional banks for payments and settlements business.
“You do need to think about financial-system stability, and you do need to think about the consequences of unregulated players in what has been for good reasons a regulated industry,” Gupta said Thursday at the Sooner Than You Think technology summit.
The DBS CEO has long been a vocal advocate of the need for banks to meet the challenge posed by insurgent fintech companies, in particular the threat from China’s Ant Financial and Tencent Holdings Ltd., which are expanding into his firm’s turf in Southeast Asia and India. Competition with large technology companies is intensifying given that they are sitting on huge customer bases and behaving like banks, he said.
“War is one way of describing it, I guess,” Gupta said of the digital revolution. Yet banks won’t disappear, he said, citing their industry knowledge, existing infrastructure and risk management capabilities. “Incumbents like ourselves don’t come to this battle unarmed.”
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DBS is more exposed than its U.S. and European banking counterparts, because technology firms like Apple Inc. and Facebook Inc. have been slower than the Chinese to diversity into online finance, Gupta said in an interview with Bloomberg News in May.
He named Ant Financial as an example of a company in need of more oversight. Part of billionaire Jack Ma’s technology and e-commerce empire, the operator of Alipay raises and lends money like a bank and so should be regulated like one, according to Gupta.
Authorities have often taken the view that they’re only paid to regulate banks, but are beginning to take a wider approach by basing their oversight on activities rather than entities, he said.
“Just because you squeeze the balloon on one side, parts of the balloon go out within your current remit — it doesn’t mean that you can ignore it,” he said. “You have to get your arms around it at some stage.”