Economic Developments and Monetary Policy

INTERNATIONAL FINANCIAL MARKETS: UNCERTAIN GLOBAL ENVIRONMENT AMID HEADWINDS

BOX 11
FINANCIAL STABILITY REVIEW SHOWS HEALTHY FINANCIAL SYSTEM

In line with the practice of major central banks, MAS published the Financial Stability Review (FSR) on the MAS website for the first time in December 2004. The new semi-annual publication analyses the risks and vulnerabilities arising from developments in Singapore and the global economy. It also examines their implications for the soundness and stability of the financial system. Specifically, it assesses the health of the financial and non-financial sectors, and their ability to withstand potential macroeconomic and financial shocks. The FSR aims to give market participants, analysts and the public a greater understanding of the issues affecting Singapore's financial system.

In the December 2004 FSR, we concluded that the balance sheet positions of domestic financial institutions, corporations and households were healthy, and were likely to be resilient to the expected moderation in economic growth. The main downside risks to the positive review were the possibility of a sustained increase in oil prices and a severe downturn in the global electronics industry. The results of a stress testing exercise, however, showed that the local banks were well placed to weather these potential shocks.urveillance framework with other central banks, particularly those from Asia.