Chairman and council members of Labuan Fintech Association,
Distinguished speakers,
Ladies and Gentlemen
Good Morning

A warm welcome to all of you to this webinar on “Banking Solutions for Labuan Companies”. I understand todays event is on conducting business in Labuan, particularly digital business and digital banking. This is indeed very topical considering the centre has been moving forward with its strategy on digital business and with current global trends.

I would like to thank the panel of industry experts for this virtual platform, to share their insights and knowledge on the challenges and opportunities for such businesses in Labuan IBFC. We will also be hearing from them on the evolution of banks brought forth by digital innovation in financial services. They will also be sharing their perspectives on Labuan’s digital banking, its potential and value propositions vis-à-vis other jurisdictions. We hope all participants will benefit from this webinar. And I would like to thank the Labuan Fintech Association (LFTA) for organising this event.

Ladies and Gentlemen,

While the COVID-19 pandemic has caused market uncertainties globally; there are these new norms of increasing “digital utilization” (like what we are doing now) and many organisations have shored up digital transformation in their operations catering to customer’s expectations and needs. There have been acceleration and scaling up of digital solutions provided to customers, particularly in the financial services sector. For example, places like the UAE and Qatar have reported significant increase in digital banking activities citing figures of 60% increase in the use digital platform. Nearer to home, according to a report by Price WaterhouseCoopers, digital banks in South East Asia are reporting a significant increase in the registration of digital banking services especially during the pandemic movement control measures. Therefore, there is no better time to extol the benefit of digital solutions than now.

In the case of Labuan IBFC, it has experienced tremendous changes in the last decade, new technologies have accelerated the pace of change at a remarkable rate. To the extent that the value propositions of its financial products and services, including the service providers, have been redefined and reshaped.

Let me take this opportunity to share the digital journey of Labuan IBFC which started about 4 years ago. With the infusion of new digital technologies and its accompanying business opportunities, Labuan FSA has calibrated policies to accommodate the digital business landscape. While most jurisdictions adopted regulatory sandbox approach, Labuan IBFC has opted for a more open approach without a special licence needed to operate innovative financial business. The adaptation of existing legacy licences has facilitated digital players to conduct their businesses. We need to be agile and flexible. From just one licence in 2017, the “digital family” has since expanded with an influx of digital businesses ranging from digital banking and insurtech to intermediaries such as robo-advisory, digital exchanges, crypto trading platforms, blockchain tokens as well as e-payment systems setups in Labuan IBFC. For 2019 alone, a total of 28 new licenses were approved to operate in Labuan IBFC’s digital space. Out of which, 15 are digital trading intermediaries, 7 e-payment system, 5 credit token business, two digital banking providers, and two new digital exchanges.

However, while Labuan FSA supports these innovations as they are impetus for expanding business boundaries, as a regulatory body, it is incumbent on us to ensure these businesses are sound and have proper market conduct practices. Such digital businesses must be properly managed by having sufficient capital resources, adequate internal controls, and strong risk management and governance. These prudential and regulatory measures are needed to mitigate any inherent risks that are brought about by the very nature of digital business, such as limited human interface, its reach, technological changes, speed, and cyber risks. Towards this, Labuan FSA will regularly review our regulatory requirements for the conduct of Labuan digital financial business to ensure these businesses are carried out in a sound, transparent and professional manner. This would give regulatory certainty and comfort to all stakeholders while at the same time enable players to pursue innovation and to facilitate new digital business models.

Other than the digital market space, Labuan IBFC is home to more than 6,000 active entities which include banks, insurance and insurance related entities, trust companies; and other niche business sectors and intermediaries. In terms of industry performance, the Labuan IBFC industry has performed well in 2019 with stronger inflow of investors/company incorporation and financial institutions, particularly from the Far East countries. Wholesale financial business in banking and insurance remained to be key areas of growth with increased profitability. Overall, there were also greater focus on out-out/international business with lesser reliant on domestic business. Please do check our industry Market Report 2019, which has been released and uploaded on our website.

In 2020, businesses continue but in slower growth pace due to COVID-19 pandemic. Like everywhere else, Labuan has also been affected by this unprecedented situation. Taking cognisant of the COVID-19 situation, Labuan FSA has re-aligned its priorities and strategies for 2020 to the current economic realities and vigilantly monitoring the impact on the Centre. Similar to our peer regulators, Labuan FSA has provided Temporary Regulatory Reliefs to the industries to alleviate their regulatory burden and to offer some level of flexibility so that the Labuan entities can provide business continuity and services to their clients.

Labuan FSA is also scanning the environment for new emerging risks and possible threats that would undermine the stability of the Centre, particularly those related to cyber and money laundering risks. We have also planned measures for post Covid-19, to adopt the new norms in the changed business landscape such as increase in utilization of digital channel, regulatory changes to cushion market impacts, proportionate supervision, and engagements with the industry to in managing the situation.

Ladies and Gentlemen,

Notwithstanding the challenges and uncertainties, I strongly believe there will be exciting times and opportunities ahead in the future. I hope this webinar will provide us with further insights and knowledge on reinventing and re-anchoring ourselves to the new ways of making and conducting business. On this note, I wish everyone a productive and insightful discussion ahead.

Thank you.