Transcription
Uh, hello everybody. Good evening and thank you all for coming.
Um, so Push, uh, you know, you'll remember that after your first SRAN lecture, I messaged you to say that's going to be a hard act to follow. Well, I have to say that you've surpassed yourself. So congratulations and thank you for sharing in such rich detail the digital journey of Singapore's financial industry.
Uh, but a lot of what you say, of course, raises many questions, which is what we are going to get into now. So everybody, please, please prepare your questions. There, there have been such stimulating things that Push has, has revealed to us that I'm sure you have plenty. But let me, let me just start first, okay? So P, you mentioned the, the explosive, uh, rise of FinTech and other non-banks in the financial system. They've improved access, uh, to financial services for both businesses and consumers. You have these companies providing, uh, things like BNPL, Buy Now Pay Later. They've got, they're providing insurance. They're even providing loans, uh, tied to their, whatever businesses they're in now. But these entities are not as well regulated as banks, right? Yet they have credit lines with banks in many cases. They also provide services to banks. They cooperate with banks. So now, would it be possible that problems in some of these places, like, for example, if they have repayment problems, uh, in an e-commerce company, or you have a FinTech systemic problem with a FinTech, would this not spill over to the banking system? In the US, it's, it's happening. You have these private credit companies, uh, which some of which have run into problems, then it is affecting the mainstream banking sector. And, and I think Jamie Diamond recently said that yes, it's happening, and there's usually more than one cockroach. So I'm just saying, would, would it, would it be a problem, uh, that could affect the Singapore system as well?
So, Vikram, first of all, thank you for your kind words. You know, the, the short answer is, um, why I focus so much on this balance between regulation, trust, and stability is if you don't proactively think about a balanced growth of the sector, what you're suggesting could happen. And by now, the bulk of regulation, think about banking, tends to be on the liability side. You protect depositors because that's where the bulk of the, you're taking people's money, and therefore regulation really focuses on saying, how do you protect people so that the savings don't get lost? And if you lose money, if a bank loses money, the first call should not be the depositor, it should be the shareholder. So the shareholder loses money, too bad. I mean, that's the logic of market capitalism.
>> Uh, but it is true that if too much shareholder money is lost and the banks don't have enough of it, it spills over into systemic risk, and we've seen examples of that.
So how do you guard against that? Number one, you got to make sure that the people who enter the industry and the sector have a minimum degree of capitalization and capital requirements. So when Singapore, when MAS first started looking at capital requirements for non-bank players, there was a little bit of a human cry saying, why so much capital? In Singapore, you know, why do you want? I think it is sensible because if you want to guard against systemic risk, you want to make sure that players have capital because capital is the ultimate source of saying that's where the first loss goes. Second is liquidity. Most banks, you look at China, the biggest issue that the banking sector had with Alibaba and Vank is they had neither capital requirements, no liquidity requirements. Now, it turned out they were okay, they didn't have a problem, but the bank's biggest, uh, beef used to be that, you know, the private operators have no constraints on suppose they blew up, they could damage the whole sector. MAS was thoughtful. So they put in liquidity requirements, they put in requirements for how much money you need to keep. And honestly, a lot of the FinTech companies in the beginning weren't happy. They said, "Oh, you know, you should throw it open like other countries have." My view is that what we do in Singapore, this balance between ensuring stability, continue to push innovation, has stood us over the long term. And if we continue to do that, then hopefully we don't run into the kind of situation that you're talking about, where there is a, a spillover from unregulated players into the regulated industry and sector.
>> Well, thanks. That's reassuring. I think we have some people lined up to ask questions. Yes, sir. Could you also please identify yourself? Thanks.
>> Thank you very much for your profound insight and wisdom. Uh, always Mr. Gutter. Uh, my name is Patrick. I have two quick questions. How do you balance bold innovation with financial prudence? And what would it take for Singapore to reach STI 10,000 and double its GDP to 1.4 trillion? Thank you.
Um, let me take your second question first, right? I mean, I saw that report as well.
>> The first thing you got to understand with the report is it is 2040, right? It's a very. The minute you say that by 2040, we will hit SDI 10,000 and double GDP, then you just have to apply the CAGR to get from 2025 to those numbers by 2040. Doesn't require an extraordinary high CAGR growth. It requires a reasonable CAGR growth. So you just, the power of compounding is massive. You compound over 15 years, you get some fairly large numbers, right? So as long as you keep doing what we've been doing in recent times, just the power of compounding will get you to circa those kinds of numbers.
The issue of, um, innovation and prudence, it's a tough challenge. I say I call it an art and not a science. Um, because every time you innovate, it's a new way of doing stuff. Most of our regulation tends to be backward-looking. I'm not just saying MAS as people as human beings, we guard against the failures that we saw. Um, I often reflect that for the last 15 of the banking sector's focus on the Basel regime has been capital, liquidity, which were the failures of the GFC. The GFC, Global Financial Crisis, was 2009, right? So we're still putting in place protection against the failures of 2009 as opposed to thinking about regulation that informs the potential risk going forward. That's just human nature. Nature, you know what you know, and then you try to regulate around what you know.
Um, but what happens then is that people start pushing the envelope, and you have two ways of trying to deal with it. One way is to say, "No can do, just don't understand." Put down the barriers and say, "Won't do any of this stuff." I found that what that typically does is not that it kills innovation, it pushes innovation out to the frontier boundaries. It takes it out of the regulated landscape. So Vikram, you just talked about after GFC, as all the regulations tightened on the regulated sector, it's not that the risk disappeared. The risk got squeezed out into private equity, private credit, um, you know, a whole bunch of other non-regulated parts of the industry because we tightened and controlled one part of the industry. So risk tends to disperse. The problem with that is that then you're, uh, running completely blind, right? Your people are doing things, and you're going to come after the fact and clean. I think the sensible and balanced regimes are the ones which don't say "no can do" but start thinking about how can we do it in moderation and how can we test and learn. And that's why I called out the sandbox regime that MAS first came up with, which is to say, okay, you can try, do it in a small place, we'll see and test and learn before we take it and, uh, you know, scale it up. So if you do that, then I think you can get the balance right between both innovation as well as making sure that you are prudent at a systemic level.
When it comes to an individual choice, you always have the choice. Do you want to, how prudent do you want to be and what kind of risk do you want to take? And I tell people, you all say, like in life, you diversify everything. So, you know, should you invest in Bitcoins as part of this thing? Financial prudence would say, maybe don't touch it. Nobody knows. But if you were to take a punt saying this is going to be the future, right? Then you say, okay, maybe I want to take a little bit of that future and take a chance on it. Now, that's a balance between prudence and, you know, regulatory oversight. So I think like in everything in life, you need to get that balance right. Don't fall entirely one way or the other way.
>> Thank you. Um, sorry, you know, on the 2040 question, I have to say that any forecast that's more than three years ahead, I think is titillating but has no practical.
>> I'm 200% with you. I'm 200% with you.
>> Okay. Anyway, sorry, next question. Yeah. Identify yourself, please. First.
>> My name is Satya. I work for an international bank called SMBC. Uh, Push, thank you very much for yet another tour de force this time on digital banking. My question, and I really liked having worked in transport for a very good part of my life. I liked your analogy of, uh, particularly the evolution of, uh, digital banking and, you know, the scam issue to transport, uh, in the early 20th century. Uh, my question is obviously, um, the evolution of insurance to address a lot of the shall we say risks that arise from interactions between players in transport. How do you see that evolving, particularly in the scam sphere and cybercrime? Because I don't see enough has evolved there, uh, with regard to that. Thank you.
>> So that's a really good question, and your observation is exactly right. So, you know, I've explored extensively seeing whether you could get insurance both for cyber, um, crime as well as for, you know, scams and frauds. And most insurance companies are reluctant to provide insurance because the downside risk can be quite unlimited. So it's hard to put your hands around it, and people have not been able to model, you know, what is the likelihood of this risk, and therefore people have been reluctant to put shareholder capital to, uh, give you protection against these risks in an unlimited kind of way. Uh, for my money, I think the answer to this is back to, I think we need to socialize these at state level. I think it'd be hard for private sector to, uh, ensure, but I think you need to socialize some of the risks at state level. If we believe, for example, we take a country, if we believe that being a digital, um, leader, being fast forward in the digital space comes with some element of risk, we might want to take, uh, stab at saying we put a protection reserve for, uh, you know, force majeure kind of situations which are systemic as a whole and do that in the interest of building innovation and a cutting-edge position. Now, it's not something that I know enough about or thought about, but I tend to believe that that might be a better way to do it, to see if we take a bet on it as a state as opposed to rely on private capital to achieve this.
>> Sorry, let me just. Are you, are you suggesting that the state should provide, for example, insurance against scams victims? Is that, is that what you're saying? Because privately, there are, there are about half a dozen insurance companies that do provide, uh, high cyber insurance, including for scams, but the, their payouts are very limited. They're limited to, I think, 25k, and the take-up is very less. So actually, society is not really well covered. So, but if the government were to provide insurance, they could charge a premium. They could also have an excess loss, uh, clause to prevent moral hazard. So is that what you're recommending?
>> Yeah. So, my general view is in some places where we, um, take a view as a nation that, you know, for Singapore's future, this is where competitive advantage would lie for us as a country, and if we can build a position in these areas, this could help cement our future in the long term, then it might make sense for the state to lean in to create the conditions that is possible to create such a future.
>> Okay. And leaning in, if it means, for example, creating a different kind of, um, social safety net. So you encourage people and create the confidence that this is an okay thing to do, recognizing that there's some third sigma, uh, standard deviation risk, which the state says, okay, we will underwrite. It might not be an illogical way to create, uh, state direction.
>> Okay, interesting. Sorry, the, uh, next question. Yes, ma'am.
>> Hi, um.
>> Thank you. Sorry, you take the Federal Deposit Insurance Program. We do it as well, right? We provide deposit insurance cover to all citizens. We get the banks to pay some part of the premium, but it's a national program. Yeah.
>> Why? Because in those days, we said we need to encourage our people to all become depositors. We got to create monetization or, you know, a banking, this thing in the system. So the state leaned into it. They created a system where the banks pay for it, right, indirectly. But the state led the process saying, give confidence to people saying your money is safe.
>> Yeah.
>> So this is another way of saying how can the state lean into giving confidence to people that you're safe. We also provide universal health insurance. Okay. Yeah. Anyway, sorry.
>> Hi, I'm Ruthvika. I'm a reporter with Bloomberg News, and I have two questions for you today. Um, with the ramping up of AI in Singaporean banks, how do you maintain morale and productivity when employees know that AI might automate their jobs? And what's the right balance between retraining, redeployment, and difficult conversations about redundancy? That's the first question. And then my second question is about stablecoins. And, you know, what's the biggest risk that stablecoins pose to banks' payments business? And should banks be more worried than they currently are?
>> Yeah. So your first question, Vikram, was going to ask if you didn't ask it. So.
>> Save me the trouble.
>> So here's, you know, first of all, in dealing with, um, employees and this thing. Let me start with the micro-ism. Um, we've had this challenge for several years. My general view is if you're willing to reskill your people, if you're willing to bring them under the tent and, uh, find them, uh, opportunities to get better and do alternate jobs, people come along for the journey. I think everybody wants to make a difference. Each one of us is changing in our personal life. You know, like it or not, you're using GenAI for every app that is on your phone today. So when you start using it in your personal life, there is no reason why you won't use it in a professional context. As long as you're trained to do it, uh, you're allowed to reskill, you can figure that you can do it in a, in a healthy way. By and large, today, where GenAI is, if you do constructive, people realize it's in a co-pilot stage, it's not in the job replacement stage, it's the job enhancement stage. So for the time being, I think people are relatively secure that it's helping reduce their workload, reduce the thing, and you can work down that path. Where do we go from here is honestly a little unclear to me. I do think that there are some serious risks with AI, GenAI, particularly around job displacement. So, you know, you think about most white-collar jobs, we do four things: we read stuff, we synthesize stuff in our mind, we produce output, you know, maybe an email or something, and then we take some action, send a follow-up, or do an accounting entry. GenAI does all of that. Reads better than we do, it synthesizes better than we do, summarizes all it actually produces presentations and output, and it can, you know, do your accounting entries for agentic AI. Does that? So when you get to the stage where you, and this is all in two years, two and a half years, it goes to a stage where it's doing it reasonably well. You fast forward and you look at the weekly improvement in AI in the models. It's not a logical belief that a large chunk of it, GenAI could do. And if that's the case, then in the short term, it could actually wind up with displacing a lot of the jobs as we know them. Right? However, um, I also have a different, this thing, which is faith in humanity and mankind. And to me, I'd like to go back to the transport analogy that you like, SH. So, you could argue that when mankind moved from the stagecoach to the motorcar, anybody who was a stableman, looked after horses, was a stagecoach driver, all those jobs went right. And believe me, it's not even as every stable horseman or horse, this thing learned how to become a chauffeur. They didn't, right? But overall, systemically, society created more jobs. It created more economic activity, created more jobs, and a new breed of people were able to benefit from that shift. So I am generally an optimist. My belief is that there will be challenges because I think there'll be job displacement. I think the transition will not be easy. So far, the last 10 years of digitization, if you're smart, you've been able to reskill and find the jobs going forward. I think some people will find it challenging. But if you were to fast forward another five years beyond that or 10 years, I think society will find ways to leverage and grow and create alternative professions and alternate jobs. So I do think yes, we have to be thoughtful. I, I don't think we should sweep the problem under the carpet. I think the transition will be a problem, and we need to work assiduously at reskilling and teaching people the skills and tools to do the new kinds of roles.
>> Okay. Thank you. Interesting what you said about the second and third order effects. It's not just the immediate effect of bankers losing their jobs. I mean, the most classic example of automation affecting jobs is from your industry, the ATMs.
>> That replaced tellers, but then tellers, because because of that, banks were able to expand their branches, and then more, more tellers became RMs, increased in number. So on the second order effects, jobs increased actually. But now, of course, you have RMs being displaced by agentic AI, right? So.
>> So, so I think, Vikram, you know, in 2016, when we started digitization, we identified at DBS, um, 1200 jobs which I knew would go just through automation and digitization. So we engaged the unions and we engaged the staff and said, these jobs won't be here in three years, but we will help you find, uh, corresponding jobs, reskill you, and find your new roles. Out of the 1200, we reskilled all of them. 300 quit and went and retired. 900, we were able to place, right? So I felt very confident. Never laid off anybody. I've never laid off anybody in the. I worry a lot more about AI because, you know, in AI, this idea of reading, synthesis, output, that's 40% of what we do. 60% of what we white-collar workers do. So I think the transition will be a lot more complex, not easy. But like you, every time we've been through a technology displacement, the global economy has only grown and prospered, and new jobs got created. And so you got to bet on our ingenuity and our capacity to thrive in a system that continues to grow.
>> Yeah. But the jobs may be in something completely different. They could not be banking or whatever. Yeah.
>> Yeah. By the way, if since one, one of the, one of the, you know, in my other hat at SMU, people keep talking about the future of education, and I have a very contrarian view. I'm convinced that the era of domain specialization is becoming less and less relevant because, you know, domain specialization, the computer will always know more than you. You press a button, you take the subject, press a button, and ChatGPT, Perplexity will do a synthesis and give you a two-page summary of the subject that you can never know and never remember, right? It'll tell you in two pages what it's all about, right? But I think the future will belong to people who can establish context, who can get the horizontal, who can find the solutioning, who can piece things together. And then, um, if you can do that, you can create by the one, I think it'll be a lot more entrepreneurship. People will leverage these things to get a lot more ideas and push a lot more entrepreneurship. So yeah.
>> Sorry, I, I've been neglecting this side of the room. So we have a question from you. Please go ahead. Yeah.
>> Hi, good evening, Mr. P and Mr. Van. So I'm Rowan and I'm a banking student at Nanyang Poly. So on behalf of all my schoolmates there, thanks for the sharing because when we talk about FinTech, right, FinTech is a very new subject in school that's being heavily emphasized. So seeing how quickly your tech has evolved over the past two, three years, looking at AI, generative AI, right, and how good AI like Gibberish can be in solving technical problems. So knowing these capabilities, right, how do we make sure that as graduates in the foreseeable future, how do we make sure our skill sets would still be in demand by your banks? And how do we make sure that the job market still needs, still requires our demands, that no, like still demands our skill sets that would not be able to be replaced by AI? Because it can be scary at times.
>> Yeah. So sort of my last comment at the end of my last question, but let me emphasize that again. Five years ago, and part of the Institute of Banking and Finance in my Workforce Singapore, we were doing a study of the future needs of Singapore grads, and the number one shortage in skills that we identified was coding, right? Computer engineering, coding. So in the last two years, all tech companies have stopped hiring coders. In three years, it all changed because I said ChatGPT can do the coding. So don't need to hire coders. So to me, the main thing to for all of you young kids, be horizontal. Do a little bit of a lot of things. I don't, I'm not saying don't do any domain. Of course, you need. But do a little bit of a lot of stuff. So you get context, you understand how things fit together, and that is something which will allow you uniquely to problem-solve and therefore, uh, be entrepreneurial, find new opportunities, and find new solutions. One of my favorite books I read recently is a book called Range, um, by author called David Epstein. Uh, the full title of the book is Range: Why Generalists Succeed in a Specialized World. That's the title of the book. And he makes effectively this case that if you really look at people who are able to succeed, it's people who've been able to build a lot of general skills. And in fact, I tell people who are like, you're doing computer science, computer, please also study philosophy and psychology as you go along. I'm convinced the biggest problems with technology in the coming decade are not problems of coding or programming. They'll be problems of philosophy. What makes us human beings? You know, why are we what we are? Is it right to do this or not right to do this? Those problems, you can marry these problems of philosophy and organizational behavior, psychology of people, why you do people into technology, uh, you will really, um, be quite uniquely placed.
>> That's great career advice, right?
>> Yeah. Thanks. Go.
>> Yes, ma'am.
>> Evening. I'm Claire, a JC1 student from Dunman High School. So my question today is, how can students like myself who are still unsure of whether whether we want to go into finance, help ourselves make a more informed decision on what course to study in university and how to better prepare ourselves. Thank you.
>> Similar question.
>> Yeah. Well, let me tell you, um, very perplexing truth. 95% of people who work in a bank don't know anything about finance because banking is a very general discipline. I meant it honestly. 5% of people need to know finance, which is corporate finance. If you're in derivatives, structured trading, corporate finance, that's about 5% of the population. The rest is the 95%. Banking is a very general management skill. So we need people with marketing skills, people with com skills, people with technology skills, people with, um, and so you don't have to know hardcore finance. But as Vikram said, my comments are pretty much the same. To be a good banker in finance in general, learn a lot about a lot of things. Economics is always good to know, but so is psychology. So is anthropology. A little bit of a lot of things, um, helps you be a good banker, a good finance person.
>> Okay. Thank you.
>> Yes, sir.
>> Yes. Uh, good afternoon, sir. My name is W2. I'm from Singapore and West Johor. Now, with the reinventing of finance in the digital age, we are seeing an exponential increase in data, especially in data storage. Uh, perhaps would you share with us how are this data being kept and scattered? Uh, what happens? Say, if a data center experiences a physical attack by, you know, unknown people. How, how, how strong is the integrity of the storage of all this data? Uh, are we in Singapore prepared for data outages, redundancy plans, so on so forth? Question number two, um, are we prepared, say, for a change in the current reserve currency system? Do we have a plan B? Say, overnight, the powers above should just decide to declare a major change in the mode of, uh, currency transaction in world trade. Please forgive me for my scattered, uh, questions because I'm not as educated as many of you are. Thank you. Thank you for your questions.
So on the data, I think there are two sub-themes to that. One is, do we have redundancy in data, which means that if something goes down, data center goes down, etc., you can still access and use data? I think most large data providers, whether it's the cloud service providers, Amazon, Google, etc., they all have distributed data centers. They make sure the data is replicated across centers. They have server farms everywhere. So I think by now, redundancy exists. The second one to the question, though, is, are they protected against data loss? That means you have redundant data because somebody stole the data and used the data. And again, you know, given all of the scandals and, uh, past years, any, uh, large provider is quite focused on trying to do that. Third-party providers, especially the public providers. However, at an individual firm level, it depends on your various data policies and security policies. So when you look for data protection, and I think the best in class is one, you need for, you need peripheral defense. So you need to make sure that can people access, get in. So are your firewalls okay? Are your, you know, external devices okay? At my old company, DBS, my CISO used to tell me, we have seven layers like an onion ring. We have seven layers of the onion ring, and people have to get through seven layers to actually get to the data types. It's not easy. So most good companies do that. The second thing, though, that companies do increasingly on data is micro-segment the data. So if somebody does get in, you only get into a small part of the data. You don't get into the entire data block. So you create small micro-segments of data to protect. Uh, and third thing companies do is use things like unusual, they use AI to see, is the data flow looking okay? Is that, does it look like the data is being misused? So they have AI at the back to check against it. Now, despite all that, you constantly see situations where there is data loss, state actors have come in. So it's a constant battle. It's a cat and mouse game. And how do you protect it? In Singapore, the Singapore government has, uh, done a really good job, uh, identifying critical infrastructure. So what is the critical infrastructure in the country, and those critical infrastructure, whether it's provided by the public or the private sector, gets an unusually high degree of requirement. The bar is quite high on how you have to deal with that and what kind of data you have to deal with.
On your question on reserve currency, it's actually, you know, there is no powers that be who decide what the reserve currency is. The reserve currency is the US dollar today because people tend to believe in the US dollar. It's a liquid market. It's a deep market. 71% of all trade in the world is denominated in US dollars, and that's what tends to make it the reserve currency. Reserve currencies are very, very, uh, difficult to shift. The US became the world's largest economy around 1870. Nevertheless, the sterling stayed the dominant currency in the world till the Second World War. So 70 years later, the power of the sterling eroded, and the dollar became more powerful. So it takes time because we human beings are creatures of inertia. So for the reserve currency to move away from the dollar is not going to be easy. And ironically, I will talk about in my third lecture, as we're moving to a stablecoin, uh, regime, I know 71% of global trade is denominated in US dollars, 96% of all stablecoins have dollar assets behind them. So in fact, instead of being less dollar-dependent, we are actually getting to be more dollar-dependent in a regime and world of stablecoins. Uh, but yeah, there are some challenges, and again, we'll hold it for next, the next lecture, but there are alternatives. I mean, the gold standard was the standard at one stage, and so you're already seeing, you know, a lot of people are rebuilding gold reserves and so on. We can talk about it the next time.
>> Thanks. I've got a message here which says, please wrap up, we're out of time. But I think Nolen, did you have a question? Yes, please. Yes.
>> Thank you very much, uh, for that wonderful, full lecture. 30 years ago, um, I was at the Fourth World Conference on Women, sitting with, um, Muhammad Yunus, Alabat from SEWA, and we launched a global campaign on microfinance. So 30 years later, it's just wonderful to see this amazing transformation, and I was just in India recently talking to the Self-Employed Women's Association, only to find the transformation that this, uh, has, uh, impacted in terms of people's lives, especially in terms of the rural women. So that was really outstanding. But increasingly of concern is the fact that whilst that transformation is happening, the scamming industry has also transformed itself. And I, uh, am very aware of the scamming centers in Myanmar, in Thailand, in Cambodia, and they have access data on individuals as well, and they know the vulnerabilities of individuals. Can there be, uh, a major educational campaign at the national level run by the banks and the FinTech, uh, entities to educate individuals? But one thing is to have the banking systems, uh, of protection, but the best way is actually to alert the individuals of their own vulnerability and how that is being used. And I'm wondering, what is that possibility?
>> I think it's a real possibility. We actually started trying to do that last year across the banks and public sector. We created a mascot, which Ibon at ABS came up with, like a chameleon, to drive a national education program for that purpose. I don't think we scaled it enough. So it's still quite niche, but I'm completely with you. So when I say that it needs a systemic response and everybody has to learn, so it becomes ingrained in the system. You think about it, in 1850, if there's a young kid, they would walk anywhere in the street. You wouldn't think about a road or not a road. You crossed wherever you wanted. Today, no kid born would ever think of doing that. You look to see, you know, where is the traffic coming from? What is right? What is left? Is the green light going on and so on? The psyche of society has changed. So it's become second nature. The only way we will battle the scams and so on is when being cautious and understanding becomes second nature for all of us. And that transition requires to be catalyzed through exactly what you're saying. I mean, more education, more pushing, creating a national thing. That is the only way you get there. Very good.
Um, on that note, I'm afraid we have to call this to a close, but not before we thank Push for a stimulating lecture, the fascinating ideas, and a wonderful discussion. Thank you.
>> Thank you. Thank you, Vikram. Thank you. [Applause]