Annual Report 2000/2001
Chairman's Statement
Bracing times lie ahead.
After growing by 10% in 2000,the economy has slowed down sharply this year. Recovery hinges on the timing and strength of a turnaround in the US and the global electronics cycle. Meanwhile, global trends of mergers of financial institutions, and concentration of activities in fewer financial centres, present new challenges for supervising and developing our financial centre. MAS’ monetary and financial sector policies must be responsive to changes in the environment, while fostering confidence through macroeconomic and financial stability.
Last year, with inflation starting to pick up and the labour market tightening, MAS shifted its stance to allow a gradual and modest appreciation of the Singapore Dollar. This monetary policy struck an appropriate balance, dampening incipient inflationary pressures while supporting economic growth. The economic slowdown this year is easing the labour market and reducing near-term domestic inflationary pressures. However, the slowdown is cyclical, not structural.MAS will take current conditions into account in setting exchange rate policy,but remains focused on the medium term outlook.
On the financial sector, MAS continues to deve op a regulatory environment that encourages enterprise and innovation while upholding safety and soundness. The amendment to the Banking Act gives effect to policies to separate financial and non-financial businesses within the local banking groups,and to facilitate setting up local bank subsidiaries to undertake new business models. MAS has worked closely with the industry to develop guidelines on Internet risk management, and with the banks to improve liquidity management procedures as well as implement the New Basel Accord (when it is adopted). Following extensive review and industry consultation, we will soon introduce a Securities and Futures Bill that will rationalise and consolidate various provisions on disclosure, prospectuses, collective investment schemes, and take-overs. We will also introduce a Financial Advisers Bill to harmonise the regulatory regime for financial advisory activities across a range of securities, futures, and insurance products.
Commission rates for the securities industry have been completely liberalised. We have introduced a second banking liberalisation package, further opening up the domestic wholesale market and increasing competition in the retail market. These measures will offer Singaporeans more high quality financial services, and encourage local players to consolidate, upgrade, and seek opportunities beyond Singapore.
A critical mass of activity and talent is now a decisive success factor for international financial centres. We have acted to boost liquidity in the Singapore Government Securities repurchase agreements and swap markets, and liberalised rules on non-residents borrowing Singapore Dollars, to help expand the investor base for the capital markets. Many major players are already in Singapore, but we need to cast our net wider, to attract both large multi-product financial intermediaries and smaller niche players. We must also garner and develop talent, both local and foreign. New schemes such as the Financial Network for Excellence in Training and the Financial Sector Development Fund will support this effort.
While broadening our horizons, we must stay the course and implement policies that enhance the reputation of Singapore and MAS. This will help us to realise our vision of a sound macroeconomy and a world-class financial centre.
Meanwhile, MAS takes this opportunity to express our sincere appreciation to Mr Lee Ek Tieng and Mr Koh Yong Guan, for their many significant contributions to MAS and the financial sector over the years. Mr Lee had been Deputy Chairman since 1998, when he relinquished the post of Managing Director. Mr Koh had been Managing Director from 1998, and remains a Board member.
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