HOME
CONTENTS
EMERGING FROM THE
GLOBAL RECESSION
MONETARY POLICY
LIQUIDITY
MANAGEMENT
ENSURING SAFETY
AND SOUNDNESS
OF FINANCIAL INSTITUTIONS AND
FINANCIAL SYSTEM
SINGAPORE AS AN
INTERNATIONAL
FINANCIAL CENTRE
ENHANCING
OPERATIONAL
CAPABILITIES
AND RESILIENCE
CURRENCY AND
PAYMENT SYSTEM

Fostering a Sound and Reputable Financial Centre

The financial crisis has precipitated international discussions to strengthen capital regulation in order to address the lessons from the crisis and promote a more resilient banking sector. In July 2009, the Basel Committee on Banking Supervision (BCBS) published a package of measures to enhance the Basel II capital framework. MAS supports these measures and has completed a public consultation on the proposed amendments to the capital rules and guidance. These amendments include a strengthening of the rules governing trading book capital and securitisations to better reflect the inherent risks, as well as the provision of guidance on bank risk management under Pillar 2 (the supervisory review process) of Basel II. In addition, the BCBS issued for consultation a comprehensive package to strengthen global capital and liquidity standards in December 2009. These included a number of fundamental proposals to raise the quantity and quality of capital, strengthen risk coverage, limit excessive leverage, promote build-up of capital buffers, and develop a global minimum liquidity standard for banks. As a member of the BCBS, MAS has been actively contributing to these international discussions and will adopt these new standards as appropriate when they are finalised.

Under the risk-based capital framework, insurers are required to maintain capital that is commensurate with their risk profile. Consequently, insurers in Singapore have been prudent in their investments, cognisant that investments in higher risk instruments require a correspondingly higher amount of capital. This has enabled them to remain resilient in the midst of increased volatility in financial markets. MAS reviews the risk-based capital framework for insurers on an ongoing basis.

This helps to ensure that the framework remains relevant and is in line with international best practices. Some significant areas which MAS is currently deliberating on include the recognition of certain capital instruments, tightening the capital requirements for related party transactions and the use of internal models for computing capital requirements for specific insurance products.

The International Association of Insurance Supervisors (IAIS) set up the Common Assessment Framework Task Force in July 2009 to develop a framework to better supervise internationally active insurance groups and their groupwide risks. In addition, the IAIS is undertaking a review of the Insurance Core Principles (ICP) and their associated standards, including standards on corporate governance and group-wide supervision. MAS has been participating actively in these discussions. Besides being a member of the IAIS Executive and Technical Committees, MAS chairs the ICP Coordination Group which coordinates the review of the ICPs and standards by the respective sub-committees.

The financial crisis has illustrated how disruption in the capital markets may lead to more widespread adverse effects on the financial system and the wider economy. The International Organization of Securities Commissions (IOSCO) reformulated its mission and adopted revisions to its Objectives and Principles of Securities Regulation (IOSCO Principles) in June 2010 to give more emphasis to addressing systemic risks posed to the capital markets. Further work is being carried out by IOSCO on the Methodology for Assessing Implementation of the IOSCO Principles to reflect the revisions to the IOSCO Principles. MAS intends to participate in the discussion on the Methodology for Assessing Implementation of the IOSCO Principles and will implement the revised IOSCO Principles as appropriate.

back to top