Category: Singapore MAS

Singapore Exchange Granted Clearing Certification by CFTC

According to the Financial Times, US regulators will now allow the Singapore Exchange to clear over-the-counter derivatives trades for American customers. This makes the Singapore Exchange the first Asian exchange to be granted this certification.

After the 2008 finical crises, the US passed the Dodd-Frank Act in order to help police the derivatives market, which is often cited as a major cause of the crisis. One of the requirements of the Dodd-Frank Act is that derivative trades be processed through clearing houses like the Singapore Exchange, guarding the market against any negative impacts that could occur should one of the parties of a trade default.

With this approval, the Singapore Exchange can now offer US traders local clearing services for products like iron ore swaps, interest rate swaps and non-deliverable foreign exchange forwards.

Approval for the Singapore Exchange came just as the Commodity Futures Trading Commission and the Monetary Authority of Singapore agreed to work together in supervising financial institutions that will involve both US and Singapore derivative markets.

Singapore is expected to mandate all trading be cleared through clearing houses sometime after the middle of 2014, bringing it up to pace with US and European regulations.

The Singapore Exchange is still waiting on similar approval from European regulators.

Speech by Singapore MAS Senior Minister Goh Chok Tong

Text of speech:

Good evening.  I am glad that the Singapore Corporate Awards has gained in reputation since its inauguration in 2006.  However, I cannot say the same for the global financial industry.  Even now, the Greek sovereign debt crisis threatens to spread its contagion effects to the international financial markets.


Singapore must never end up with any sovereign debt problem.  There will be no European Union to bail us out.  And long before we call in the IMF, investors would have taken fright and capital taken flight.

So, let me reiterate the importance of good governance, both political and corporate.

One essential requirement of good governance is fiscal responsibility, in particular, not spending beyond your means.  More than a balanced budget, given Singapore’s lack of resources, our small and open economy and our vulnerabilities to external events, we need to build up healthy reserves for a rainy day and to safeguard our future.  But for our reserves during the recent financial storm, we would not have weathered it without mishap.  For example, the government would not have been able to credibly guarantee bank deposits at short notice to prevent an outflow of funds to other financial centres, which offered such a guarantee.  More importantly, we had the resources to roll out quickly bold schemes like the Jobs Credit scheme and SPURS.  Together, these schemes helped companies to hold on to their workers, and to use the downturn to send their workers for training and upgrading.  So, not only did we keep unemployment low through the crisis, but our companies were also able to ramp up quickly to meet the surge in orders when the global economy recovered.

Good governance is central to Singapore’s competitiveness as a business hub.  Our hard-earned reputation for political stability, integrity, rule of law, sound accounting frameworks and a strong commitment to efficiency and effectiveness has made Singapore an attractive place for global businesses.  For these reasons, the “Doing Business Report 2010” by the World Bank recently ranked Singapore as the country with the most conducive environment for business.

While the government has created this favorable environment, the corporate sector must build on it through good corporate governance.  Though we also have a good reputation here, we can do more.

To raise standards, MAS established the Corporate Governance Council in February 2010.  The Council will use the backdrop of the recent financial crisis to review Singapore’s Code of Corporate Governance.  What lessons have we drawn?  What needs to be updated?  What are other jurisdictions doing?  Can we adapt their solutions to suit our circumstances?  How can we provide better guidance to directors and management on improving their corporate governance practices?  How can we address gaps in the training and professional development of directors to promote higher standards of board performance?  These are some questions that the Council will address.


However, formal regulations and guidelines can only go so far.  Neither the Code of Corporate Governance nor MAS’ Corporate Governance Regulations can spell out all the scenarios of good corporate governance.  As you know too well, any corporation can write high-minded statements of corporate governance but the hard part is believing in and living those values.  I will touch on three key areas in which you as corporate leaders can play a leading role in strengthening the values and practice corporate governance.


First, corporate governance is not simply about complying with rules or reporting requirements.  Boards of directors and senior management need to internalize the values, spirit and purpose behind the rules.

Take for example, the area of risk management.  An OECD report in June 2009 found that excessive emphasis appears to have been given to corporate risk reporting, without sufficiently considering how the information generated for risk reporting could be used for the companies’ strategies in growth and risk management.  The corporate casualties during the global financial crisis showed how this could have devastating consequences.  To prevent this, the board’s role must extend beyond corporate reporting to using the information to exercise proper oversight of risk management.  This includes setting the risk appetite of the company and monitoring that risks are managed properly on an enterprise-wide basis.


Second, good governance requires people with the appropriate skills and mindset.  While having a comprehensive risk management framework is necessary, human expertise and judgment are equally important.  One key learning point from the financial crisis was that financial institutions which experienced more significant problems during the crisis tended to apply a “mechanical” approach to risk management, without exercising expert judgment to challenge the outputs of quantitative risk models.

It is incumbent on boards to identify the skill sets required of directors and to keep those skill sets updated.  Directors need to take personal responsibility to ensure that they devote sufficient time to attend relevant training and to apply their judgment well.


Lastly, boards of directors set the overall tone for the culture within their companies.  Boards need to take a broader and a longer-term view when setting directions for their companies, balancing the drive to generate earnings with appropriate guidance on the level of their companies’ risk appetite.  Remuneration structures must strike the right balance between incentivizing profit-maximization and discouraging excessive risk taking.  Independent directors serve as a check and balance to management, ensuring that the interests of the company and its shareholders are protected.  In financial institutions like banks and insurance companies, customers’ interests especially must be protected.


In conclusion, improving corporate governance is a collective responsibility.  For Singapore to continue thriving as an international financial and business centre, it is incumbent on all corporate leaders to take ownership of this responsibility, and to lead by example at your companies.  A study done by the Singapore Management University showed that investors are willing to pay a premium for companies with high standards of corporate governance.  Therefore, it follows that the more accountable and transparent a company, the more likely institutional investors would invest in the company.

It is in this context that I commend the Singapore Exchange and Business Times for organizing the Singapore Corporate Awards.  Spotlighting good practitioners of corporate governance not only shows others that it can be done but also raises the bar for others to emulate.  I congratulate the winners of the Singapore Corporate Awards tonight for your exemplary contributions to good corporate governance.  May your success inspire others to do likewise.

MAS reviews the regulatory regime for financial intermediaries

The Monetary Authority of Singapore is reviewing the regulatory regime for financial intermediaries conducting fund management activities and the exemption regime for financial intermediaries engaged in leveraged foreign exchange trading.  A consultation paper has been issued to seek comments from the public on proposed enhancements and changes to the regulatory regime.

The proposals under the consultation paper represent an evolution of the existing regulatory regime for the fund management industry.  Fund Management Companies [“FMCs”] whose activities are limited in scale and impact may continue to operate under a notification regime and be subjected to certain conditions.   This is similar to the existing framework for exempt fund managers.  FMCs who serve retail investors and/or manage or advise on a larger portfolio of assets will have to be licensed.  MAS also intends to require all FMCs to meet business conduct as well as capital requirements.

Under the proposed business conduct requirements, FMCs will need to maintain customers’ monies and assets with independent custodians, ensuring segregation of duties between the functions of fund management and fund administration.  FMCs will also need to have compliance arrangements which are commensurate with the size and scale of the FMCs’ business. These requirements aim to enhance safeguards against theft or misappropriation of customers’ monies.

CFTC ACTION: Kuen Cheol Song

The CFTC announced that it charged Kuen Cheol Song, a citizen of Singapore, with engaging in fictitious transactions and trading noncompetitively in violation of the Commodity Exchange Act and CFTC regulations. Song has never been registered with the CFTC.

The CFTC complaint alleges that, since at least August 28, 2009, defendant Song engaged in a series of unlawful commodity futures transactions involving Natural Gas and Hearing Oil futures contracts on the New York Mercantile Exchange. Through this allegedly unlawful scheme, Song repeatedly made non-competitive, fictitious trades between his personal account and the hedge fund account of his employer, Singapore-based Woori Absolute Partners, where he is a director. Since August 28, 2009, according to the complaint, Song’s personal account has profited by more than $348,000 through this illegal scheme of non-competitive, fictitious trades, while Woori’s account has lost a corresponding amount.

Consultation Paper on Review of the Deposit Insurance Scheme in Singapore

From the Release:

The Monetary Authority of Singapore (MAS) is consulting the public on recommendations to amend and enhance various features of the Deposit Insurance (DI) Scheme in Singapore.

2. As part of our regular review, MAS and the Singapore Deposit Insurance Corporation (SDIC) which administers the DI Scheme, have reviewed it to ensure that it continues to fulfill its primary objective of providing adequate protection to small depositors.

3. The consultation paper proposes to expand the scope of coverage under the DI Scheme, beyond the deposits of individuals and charities, to other non-bank depositors such as sole proprietorships, partnerships, companies and unincorporated entities.  The paper also proposes to raise the coverage limit under the DI Scheme by 2.5 times from S$20,000 to S$50,000 per depositor per Scheme member.  The increased coverage limit of S$50,000 would fully insure 91% of the expanded insured depositor base of individuals, charities and other non-bank depositors.  This compares to 83% of insured depositors who are fully insured currently under a S$20,000 coverage limit.  CPF monies placed with a Scheme member will be insured under a separate S$50,000 limit.

4. MAS invites interested parties to give their views and comments on the proposals contained in the Consultation Paper. (Click here to view the consultation paper). We will assess and consider all comments received before finalising the proposals and commencing the legislative process, with a view to implement the amendments to the DI Scheme by early 2011.  Please submit your written comments by 26 March 2010.

Note to Editor
The DI Scheme was implemented in 2006.  Its design was guided by several considerations which included the need to provide adequate protection for the majority of small depositors while limiting the cost of DI to Scheme members and depositors and preserving the incentives for large depositors to exercise market discipline.

The DI Scheme is administered by the Singapore Deposit Insurance Corporation (SDIC). For more information on the SDIC please refer to


Government measures to ensure a stable property market

From the release:

1. The Government announced today the following measures to ensure a stable and sustainable property market:

a) Introducing a Seller’s Stamp Duty (SSD) on all residential properties and residential lands that are bought after today and sold within 1 year from the date of purchase [1]; and

b) Lowering the Loan-to-Value (LTV) limit to 80% for all housing loans provided by financial institutions regulated by the Monetary Authority of Singapore (MAS)

The measures will take effect on 20 February 2010.

2. In September last year, the Government introduced a set of measures [2] to temper the exuberance in the private residential market. The Government has continued to monitor the property market closely.  While the September 2009 measures helped to cool the property market, there are recent signs that it is starting to heat up again.

3. Demand for private housing units has spiked sharply in January this year. The number of units sold by developers in January was triple that in December 2009 and was the highest monthly total since September 2009.  Prices have also increased sharply in the second half of 2009, at a faster rate compared to previous rebounds from the troughs of property cycles, and the price increase has continued in January. Mortgage lending has also increased steadily by around 12% year-on-year through 2009.

4. While the current level of speculative activity in the market is still lower than what it was at the height of the property market boom, and overall price levels are below the previous peak, there is a risk that the market could overheat in the next few months, fuelled by low global interest rates and positive sentiments associated with the economic recovery.

5. Any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy.  Should growth turn out weaker than expected, property buyers and speculators could face capital losses as the market corrects.  Conversely, if the recovery stays on course, interest rates will eventually rise and drive up financing costs with severe implications for those who have overextended themselves.

6. Therefore, the Government has decided to introduce calibrated measures now to temper sentiments and pre-empt a property bubble from forming.  We will tighten the supply of credit to the housing market to encourage greater financial prudence among property purchasers. The Govern¬ment prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed.

7. The Government will continue to monitor the property market closely and will introduce additional measures if required later, to promote a stable and sustainable property market.

Seller’s Stamp Duty (SSD) on Residential Properties Sold within 1 Year

8. The SSD will be levied on sellers of residential properties and lands [3] bought on or after 20 Feb 2010, and sold within one year from the date of purchase [4]. Properties bought before 20 Feb 2010 will not be subject to the SSD.

9. The objective of this new tax measure is to discourage short-term speculative activity that could distort underlying prices. It is not targeted at the purchase of properties for owner-occupation or longer term investment.

10. The SSD will be applied at the standard ad valorem stamp duty rates [5] for the conveyance, assignment or transfer of property: 1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance.

11. The SSD will not be applicable to HDB flats as they are already subject to a minimum occupation period of at least one year [6].

12. IRAS will be releasing an e-tax guide on the circumstances under which SSD will apply and the procedures for paying SSD. The e-tax guide will be available at Taxpayers with enquiries may call IRAS at 6351 3697 or 6351 3698. The telephone lines will be opened till 6.30 pm on 19 February 2010 and from 8.30am to 1.00 pm on 20 February 2010.

Lowering Loan-To-Value (LTV) Limit to 80% for Housing Loans

13. The LTV limit will be lowered from 90% to 80% for all housing loans provided by financial institutions regulated by the MAS.  The 80% LTV limit will apply to all housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats (including those under the Design, Build and Sell Scheme, or DBSS flats).[7]

14. Loans granted by HDB for HDB flats (including DBSS flats) will still have an LTV cap of 90%. This is because HDB flats are already subject to other criteria to prevent speculation and encourage financial prudence e.g. minimum owner occupation period and restriction on ownership to one flat per household.  HDB loans are offered to only eligible first-time flat buyers or second-timers who are upgrading. They are required to utilise all of their CPF Ordinary Account balance before HDB loans will be granted.  This is in line with HDB’s home ownership policy of helping eligible buyers, especially first-time buyers, purchase public housing in a financially prudent manner.

15. Financial institutions’ lending standards have remained prudent.   Currently, less than 10% of housing loans are granted at LTVs greater than 80%, although there are signs that more housing loans are originating at higher LTV bands.  In line with the objective of ensuring a stable and sustainable property market, lowering the LTV limit sends a clear signal to the financial institutions to maintain credit standards, and encourages greater financial prudence among property purchasers.

Adequate Supply in the Pipeline

16. The Government will also continue to ensure that there is adequate supply of housing to meet demand. Sites that can yield 10,550 private housing units have already made available in the Confirmed and Reserve List of the Government Land Sales (GLS) Programme in the 1st Half of 2010. This is the highest supply quantum in the history of the GLS Programme.

17. In addition, the Government placed 8 residential sites, including 2 Executive Condominium sites, which can potentially yield about 2,900 units on the Confirmed List. This was close to the highest ever potential supply of about 3,000 units (in the 2nd Half 2007 GLS Programme) from the GLS Confirmed List, since the Reserve List / Confirmed List system started in 2001. If necessary, the Government would inject more supply in the 2nd half 2010 GLS Programme.

18. Apart from the supply from the GLS Programme, there were also 60,476 uncompleted units of private housing from projects in the pipeline as at 4Q2009. Of these, 34,234 units were available or could be made available for sale. These comprised units that had been launched for sale by developers, units that had pre-requisite conditions [8] for sale and which could be launched for sale immediately, as well as units with planning approvals for which pre-requisite conditions for sale could be obtained quickly from the Government and made available for sale. [9]

Issued by the Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore

19 February 2010


[1] For example, if a property is bought on 15th March 2010 and sold within 12 months, i.e. on or before 14th March 2011, SSD will apply.

[2] The measures were the removal of the Interest Absorption Scheme and Interest-Only housing loans, resumption of the Confirmed List under the Government Land Sales Programme in 1st Half of 2010, and non-extension of property-related measures announced as part of Budget 2009 which expired in January 2010.

[3] The SSD will apply to the transfer or disposal of interest (including sale and gifts) of residential lands and residential units (whether completed or uncompleted).

[4] The date of purchase for computation of the holding period for SSD shall be the date when a buyer (i.e. Buyer A) exercises the option to purchase the property, or signs the sale and purchase agreement, whichever is earlier. The date of resale of the property shall be the date when the subsequent buyer (i.e. Buyer B) exercises the option to purchase the property from Buyer A, or signs the sale and purchase agreement, whichever is earlier.

[5] 1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance.

[6] Executive Condominiums and HUDC flats that are purchased on the resale market are not subject to the minimum occupation period, and SSD will therefore apply to them.

[7] The 80% LTV limit will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 20 February 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 20 February 2010. For the avoidance of doubt, the date of purchase for the lowering of the LTV is the date the OTP is granted; while the date of purchase for the levying of the SSD is the date the OTP is exercised.

[8] Refer to private residential developments with Housing Developer Licence and Building Plan Approval. Under the Housing Developer (Control and Licensing) Act, a sale licence must be obtained for a project with more than 4 units, if the developer intends to sell uncompleted residential units in the development.  However, the sale of the residential units can only commence with the approval of the building plans of the development.

[9] Refer to uncompleted private residential developments without pre-requisites for sale but with Written Permission or Planning Permission granted. The sale licences could be obtained within 5 working days and building plan approvals could be obtained within 7 working days from the date of application for cases where clearances from various technical agencies are obtained and relevant documents are in order during formal submissions.


MAS will lift the ban on the sale of structured notes for DBS Bank Ltd

The full release:

Singapore, 11 February 2010… The Monetary Authority of Singapore (MAS) today gave an update on the actions undertaken by financial institutions to comply with the formal directions issued by MAS [1]  following our investigation into the sale and marketing of structured notes linked to Lehman Brothers. [Please Click here to view the Investigation report Press Release].

2. DBS Bank Ltd, Malayan Banking Berhad Singapore Branch and the Royal Bank of Scotland N.V. Singapore Branch[2], have formally confirmed to MAS that they have taken measures to rectify all the weaknesses identified in MAS’ investigations.  They have also reviewed and strengthened internal processes and procedures for the provision of financial advisory services across all investment products.

3. Under MAS’ directions, the financial institutions were required to appoint an external person to review their action plan and report on its implementation. DBS Bank Ltd appointed KPMG LLP (KPMG) while Malayan Banking Berhad Singapore Branch and the Royal Bank of Scotland N.V. Singapore Branch, appointed PricewaterhouseCoopers LLP (PwC) as their external person. The external persons have completed their review, and have reported their findings and recommendations for enhancements to the financial institutions.  Based on their review, KPMG and PwC are satisfied with the action plans and their implementation by the financial institutions.

4. The three financial institutions have publicly pledged their commitment to effectively implement various measures on an ongoing basis in order to deliver fair dealing outcomes to their customers.  These include reviewing their remuneration framework, stepping up training and supervision of their staff and enhancing the sales and advisory process.  MAS will hold the Board and Senior Management of the financial institutions accountable for meeting this commitment.

5. MAS will lift the ban on the sale of structured notes for DBS Bank Ltd, Malayan Banking Berhad Singapore Branch and the Royal Bank of Scotland N.V. Singapore Branch with effect from 12 February 2010. While MAS has lifted the ban, DBS has assured MAS that in order to uphold a consistent set of standards across the region, it will not sell structured notes to retail customers anywhere in the group until it has rolled out enhanced measures and sales processes in all its key markets. This includes Singapore, even though the measures have already been implemented here.

6. The status of the MAS’ directions for the other financial institutions are as follows:

DMG & Partners Securities Pte Ltd and UOB Kay Hian Pte Ltd have asked MAS for additional time to work with their external persons to ensure that the enhanced measures put in place are sufficiently robust and in accordance with MAS’ directions.

The ban on the sale of structured notes continues for the remaining four financial institutions – CIMB-GK Securities Pte Ltd, Kim Eng Securities Pte Ltd, OCBC Securities Pte Ltd and Phillip Securities Pte Ltd – until the end of the period of their ban.  MAS will only lift the ban when we are satisfied with the measures they have put in place.

Hong Leong Finance Limited has voluntarily ceased the provision of new financial advisory services, including the sale of structured notes.

7. To help consumers make informed decisions, MoneySENSE has published a consumer guide “Making Sense of Structured Products”.  MAS encourages consumers to refer to this guide before deciding whether to invest in a structured note. Developed jointly with the Association of Banks in Singapore and the Securities Investors Association (Singapore), the guide explains key features of structured notes, the risks involved and what consumers should look out for when investing in such products.  This guide is available at


[1]   MAS issued formal directions to ten financial institutions (Please click here to view Annex 1)to cease dealing in and providing financial advisory services for structured notes for periods ranging from a minimum of six months to a minimum of two years with effect from 1 July 2009. The financial institutions had been directed to rectify all the weaknesses identified by the investigations and to review and strengthen all internal processes and procedures for the provision of financial advisory services across all investment products. In addition, the financial institutions were required to appoint an external person to review their action plan and report on its implementation, and appoint a member of the institution’s senior management to oversee compliance with MAS’ direction.

[2] The Royal Bank of Scotland N.V. Singapore Branch was formerly known as ABN AMRO Bank N.V. Singapore Branch.

Singapore’s policy on Dark Pools

Date: For Parliament Sitting on 12 January 2010

Name and Constituency of Member of Parliament
Mdm Ho Geok Choo, MP for West Coast GRC

Mdm Ho Geok Choo: To ask the Senior Minister with the emergence of dark pools which allow trading of stocks to occur away from public eyes and off central exchanges (a) how will the Ministry deal with the regulatory issues that these dark pools are likely to throw up; and (b) how will the Ministry address issues such as insider trading if investors are allowed to trade anonymously.

1. Dark pools, otherwise known as crossing networks, are an alternative trading venue where institutional investors can transact large blocks of shares that are listed and traded on stock exchanges.  Concerns that have been raised about crossing networks include possible market fragmentation and a lack of transparency.

2. The Monetary Authority of Singapore (MAS) recognises these concerns and has brought crossing networks under its regulatory regime for recognised market operators1 since September 2007.  These market operators are permitted to offer trading access only to institutional investors, and have to comply with the relevant statutory obligations.  These include ensuring that the market is fair and orderly; managing any risks associated with its business and operations prudently; and not acting contrary to the interests of the public.

Market Fragmentation
3. Currently, orders above S$150,000 or 50,000 shares can be executed off the Singapore Exchange (SGX) as SGX members can negotiate such orders directly with each other.  These off-exchange trades are subject to relevant SGX trading rules which require a trade to be reported to the Exchange within 10 minutes of execution.  SGX’s rules seek to balance the ability of institutional investors to execute large transactions, minimising market impact costs2, with the overall requirements of market transparency and integrity.  MAS has required crossing networks to match only large orders that comply with the SGX off-exchange thresholds.  As an additional measure to prevent liquidity in the exchange from being fragmented by the crossing network, MAS has set limits on the volume any crossing network can trade in any single SGX-listed share.

Transparency and Surveillance
4. Crossing networks are required to submit regular trade reports to MAS and maintain an audit trail of their trades.  In addition, they have to report each trade to SGX to ensure consolidated post-trade transparency.  This information forms part of a share’s turnover, which is reported to the public.  As part of its regular market surveillance and enforcement work, SGX is responsible for the detection of irregular trading and follow-up on suspicious trades, including possible insider trading.  This applies to transactions put through crossing networks.  Following its initial investigations, SGX will refer the case to MAS, where necessary.  MAS has statutory powers to obtain information, including the identity of the investor.  MAS therefore does not consider crossing networks to pose additional concerns on insider trading.

5.  Crossing networks provide an efficient channel for institutional investors to deal in large blocks of shares.  MAS will continue to monitor the development of crossing networks in Singapore as well as global regulations relating to these entities, and review our regulatory regime if needed.

1  The recognised market operator regulatory regime caters to markets including traditional exchanges and trading facilities which pose lower systemic risk to Singapore.

2  Market impact costs refer to the change in market price as a result of a large order that is placed on the exchange.  It is the difference between the transaction price and what the market price would have been without the large order.

Minister for Trade and Industry speaks about Singapore’s regulatory philosophy

Date: For Parliament Sitting on 11 January 2010

Name and Constituency of Member of Parliament
Q189:  Mr Christopher de Souza, MP for Holland-Bukit Timah GRC

Mr Christopher de Souza: To ask the Senior Minister in view of the past year’s global financial crisis (a) whether the level of Government regulation of our financial market will increase; and (b) whether the Government’s regulatory philosophy of the market has shifted due to the lessons gleaned from the crisis and, if so, (i) how has it shifted and (ii) what have been the lessons gleaned.

Note: The above Question was originally directed to the Minister for Finance (vide Q.*189 in Notice Paper No. 214 of 2009).

Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman:

The general view that has emerged from the financial crisis is that following a period of deregulation of financial markets and fairly benign economic conditions in advanced economies in the US and Europe, there has been an over-reliance on markets to self-correct and on financial institutions to manage their own risks.  As a consequence, a variety of risks were under-estimated and when these risks materialised, and interacted in unexpected ways, many financial institutions came under stress and had to be bailed out by their governments.

2. Mr de Souza asked what lessons we have drawn from the crisis and whether our regulatory philosophy has shifted.  I should first point out that Singapore is at a different starting point from the advanced economies.  We have always maintained a robust regulatory framework and rigorous supervisory approach which helped our financial system to remain resilient through the crisis.  We also believe that a stable and dynamic financial system that serves the needs of the economy and the public cannot be built on regulation alone.  Responsible and competent board and senior management who manage the risks of their financial institutions well are also critical.  In addition, MAS also promotes transparency and market discipline in our financial system [1] . This will improve the quality and comparability of financial information available to the public and investors.

3. In short, Singapore’s regulatory philosophy is to maintain a sound regulatory framework but to complement this with board and senior management responsibility at financial institutions, as well as disclosure and market discipline.  We believe that this continues to be relevant and appropriate.

4. Nevertheless, while our local financial institutions have generally weathered the financial crisis well, there is no room for complacency.  International standard setters have been busy deliberating specific areas for strengthening regulation and board and senior management oversight, and MAS will continue to keep our regulations and industry abreast with global best practice.  Let me explain more of what MAS is doing.

Strengthening the Regulatory Framework

5. In the area of prudential regulation, MAS already requires our banks to meet minimum capital requirements which are higher than international standards, as well as liquidity and provisioning requirements which were not widely adopted internationally prior to the crisis, but are now regarded as necessary and appropriate.  In December 2009, the Basel Committee on Banking Supervision released a package of proposals to strengthen global capital and liquidity regulations for consultation.  These are targeted for adoption internationally by end-2012.  Our relatively conservative regulatory framework and the strong capital and liquidity positions of our financial institutions mean that we are well placed to meet new stringent international regulatory standards.  Over the next one to two years, as details of the international proposals are firmed up, we will consult widely with the public and the financial industry and ensure that we adopt the new international standards in ways that are appropriate to our context.

6. Second, the crisis has led regulators in many countries to re-examine aspects of their approach regarding the sale and marketing of structured products.  In Singapore, MAS undertook a review of the regulatory regime governing the sale and marketing of unlisted investment products.  In March 2009, MAS published its policy consultation paper with proposals that covered issues such as promoting more effective disclosure, strengthening fair dealing in the sale and advisory process, introducing an enhanced regulatory regime for the sale of complex investment products, and enhancing MAS’ powers.  In its review, MAS has been careful not to come up with overly prescriptive rules and the approach is intended to continue giving Singaporeans choices in their investment options.

Strengthening Board and Senior Management Responsibility

7. MAS’ regulation cannot replace the primary role of the Board and senior management to ensure that the requisite controls and risk processes are implemented robustly throughout their organisation. MAS will be reviewing the Corporate Governance Regulations and Guidelines for locally incorporated banks and significant life insurance companies. These guidelines were introduced in 2005 and which were implemented in 2007.  The review will focus on the effectiveness of risk management at the Board level, including the role played by Boards in safeguarding the safety and soundness of their institutions, managing market conduct risks and setting remuneration policies to manage these risks effectively.

8. In summary, MAS and all financial sector stakeholders have important roles to play in strengthening financial stability and market confidence in our financial system.  Investors too have a responsibility to understand the products they invest in.

9. MAS will take a balanced and pragmatic approach in reviewing any regulatory changes, and will complement this with a focus on Board and senior management effectiveness, including their role in safeguarding the safety and soundness of their institutions and in delivering fair dealing outcomes to their customers.




Establishment of the Chiang Mai Initiative Multilateralization

From Release:

1. The Finance Ministers and Central Bank Governors of the ASEAN Members States, China, Japan and Korea (ASEAN+3) and the Monetary Authority of Hong Kong, China, are pleased to announce the signing of the Chiang Mai Initiative Multilateralization (CMIM) Agreement following the conclusion on all the main components of the CMIM at the ASEAN+3 Finance Ministers’ Meeting (AFMM+3) in May 2009 in Bali, Indonesia

2. The CMIM will strengthen the region’s capacity to safeguard against increased risks and challenges in the global economy. The core objectives of the CMIM are (i) to address balance-of-payments and short-term liquidity difficulties in the region and (ii) to supplement the existing international financial arrangements.

3. The CMIM, with the total size of USD 120,000,000,000 (one hundred and twenty billion), will provide financial support through currency swap transactions to the CMIM participants facing balance-of-payments and short-term liquidity difficulties. Each CMIM participant is entitled, in accordance with procedures and conditions set out in the Agreement, to swap its local currency with the United States Dollars for an amount up to its contribution multiplied by its purchasing multiplier. (Attachment 1)