Singapore and Hong Kong feature prominently in banking news recently as proxies in the battle between incumbents and challengers. But with investment from the city state's wealth fund, the incumbents have been beefing up and undergoing transformation. 'The announcement by the MAS that it will issue up to five new digital bank licences is credit negative for small foreign-owned incumbent banks in Singapore,' Simon Chen, vice president for financial institutions group at Moody's Investors Service, said in a note on Tuesday, indicating that their credit ratings may suffer as a result. 'Their modest domestic franchises will face the greatest disruption risk from digital bank entrants,' he added in a statement. Hong Kong has a similar framework for digital bank licenses. In recent months, the Hong Kong Monetary Authority began granting digital-only banking licenses to firms that are backed by the likes of Standard Chartered, Tencent and Alibaba-affiliate Ant Financial, among others."
Among those setting up in Singapore is Revolut. Revolut has appointed Richard Davies as its new chief operating officer after facing scrutiny in the UK and Lithuania over its compliance procedures. Mr Davies was chief executive for OakNorth during its early days, and also worked at HSBC and TSB in recent years. In the sacred sprint to scale up, Revolut simply bypassed some compliance procedures, including turning off systems that were meant to flag suspicious transactions. "The board was informed in 2018 that automated systems to block suspicious transactions had been disabled for months, meaning that thousands of illegal transactions may have flowed through the app's systems between July and September. The automated system had reportedly been blocking many legitimate transactions that were cropping up as "false positives", much to the chagrin of users. This inspired the bank to disable its blocking system and switch over to a screening process, which allowed suspicious transactions to be made and then later reviewed."
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