Over the past 10 years, global financial centers have all suffered from the 2008 global economic crisis, which directly resulted in tighter financial regulation across the globe. But now financial technology is blossoming all over the world, financial centers are facing the same question, how to balance financial regulation and innovation?

“Financial regulation should not be absent, neither be over-applied. It should be controlled to an appropriate level.” summarized Dr. Pei Sai Fan, visiting professor of Nanyang Technological University of Singapore and former Director of the Monetary Authority of Singapore (MAS) Academy. This is what he proposed to Guangdong on financial regulation with the aim of boosting high-quality economic development.

Organized by Xie Sijia, Liu Jiangtao, Xie Meiqin, Luo Yanjun, Zhang Ying, Huang Qianwei

Reported by Peng Lin, Huang Qianwei, Guo Jiaxuan, Tang Liuwen, Tang Zitian, Zhang Jun, Long Jinguang, Hu Nan

Edited by Olivia Ouyang, Simon Haywood

Chinese Version please click:

全球金融中心深调研④|国际金融中心如何走好监管与创新的平衡木？

Dr. Pei Sai Fan, visiting professor of Nanyang Technological University of Singapore and former Director of the Monetary Authority of Singapore (MAS) Academy.(Source: Nanfang Plus)

Regulatory Sandbox, a new trend in financial regulation

In recent years, fin-tech companies have sprung up all around the world, providing more convenience to the public through new technology and ideas. However, most of them are not in line with current credit regulations. So, how can those companies be financially supported while carefully avoiding risks?

This is where the global experimental Regulatory Sandbox, initiated in the UK in 2015 and rapidly adopted by other key countries.

According to the Financial Conduct Authority (FCA) in UK, the regulatory sandbox aims to create a “safe space” in which start-ups, entrepreneurs, and even established companies can launch products on a limited, temporary scale to consumers to test innovative products, services, business models, and delivery mechanisms in the real market without incurring the regulatory costs and burdens that would otherwise be imposed.

At present, the UK, Singapore, Australia, the US, France, Germany and other countries are running this model and have drawn valuable lessons from it. Lar year (2017), Beijing had planned to experiment with the model for the first time in China.

Dr. Pei suggested that since Guangdong is strong in technological innovation, the province could take the widely-accepted Regulatory Sandbox experiment and explore a suitable way to boost FinTech development.

Monetary Authority of Singapore. (Source: Nanfang Plus)

Placing equal stress on supervision and innovation

“Regulation is one method of boosting innovation. The government should pay equal attention to both sides.” emphasized Dr. Pei, who has over 30-year experience in financial institutes and related government departments.

When talking about how Guangdong ought pay equal attention to regulation and development, Dr. Pei proposed that the regulatory departments should just stipulate a general plan or strategy, aiming to optimize the financial mechanism, create a better environment and cultivate a proper ecosystem, leaving the details to institutions and professionals.

More specifically, Dr. Pei advised that Guangdong should focus on accelerating supply chain financing, international trade financing and fintech innovation, based on its own conditions. For instance, the province could accelerate the deployment of block chain technologies in logistics to increase productivity.

Many experts and finance professionals indicated that regulators should maintain the stability of policies and avoid over regulations when keeping strict supervision. New problems brought by FinTech could be settled by progressively perfecting our country's legal framework and enhancing the guild’s self-regulation.

They also believe that the financial regulators should define the scope of regulation and clarify the aim of boosting economic development, focusing on regional and national economic strategies.

Dr. Pei recommended that Guangdong’s high-quality economic growth is relying on an effective financial regulatory mechanism. Only when the focus is on providing services to representative industries and exploring new roads and cooperation with industries, can the regulator fulfill its duty.