ANNUAL REPORT 2002 / 2003


Financial Market Activity

Lending in the Domestic Market

Domestic lending activity was weak, both in the interbank and non-bank segments. Interbank lending fell by 9.6% in 2002, with the bulk of the decline coming from a contraction in lending among resident banks. This reflected the consolidation in the banking industry and ample market liquidity, which reduced the need for banks to borrow to maintain their liquidity positions.

The weak economy also took its toll on non-bank lending which fell by 1.6% in 2002. Non-bank lending fell across most sectors, except mortgage loans which grew 10.6%. This was due to mortgage rates being driven lower because of strong competition amongst banks and a change in CPF rulings, that now allows CPF money to be used as part of the down-payment for private property purchases.

Lending in the Asian Dollar Market

Interbank lending, especially to Europe, supported activity in the ADM. Non-bank lending, however, continued to decline, albeit at a slower pace than during the Asian crisis. There was a shift from cross-border lending to lending by foreign bank affiliates within the countries. There was also a notable shift from bank financing to capital market financing.

Non-bank lending is likely to remain weak in 2003, with interbank lending remaining the main source of market activity. Bank earnings are likely to shift towards non-interest income sources. From a flow of funds perspective, the ADM has remained an important centre for mobilising interbank funds globally. (See Box 8.)  

Syndicated Lending

In 2002, syndicated lending fell by 27.3% as firms cut back capital expenditure on expectations of a further delay in the global economic recovery. (See Chart 3.) As in previous years, borrowers from North Asia (excluding Japan) accounted for the largest number of total cross-border syndicated loans.2 Cross-border lending, which accounted for 47.2% of total syndicated lending, declined by 38.6% in 2002. This decline is consistent with the shift from cross-border lending in the ADM to lending by foreign bank affiliates within the countries.  

Debt Market

The steps taken by MAS over the past few years to develop the debt market has increased its breadth and depth. The average daily turnover of Singapore Government Securities (SGS) has grown by more than two and a half times in the past five years. In the corporate bond market, 2002 was a record year in terms of the total outstanding volume of corporate debt and the number of issues by foreign entities, despite a slowdown in new issuance.


A More Resilient Financial Sector Structure of Financial Sector Financial Market Activity
Singapore Government Securities Market  Corporate Debt Market

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