Annual Report 2001/2002

Exploring Linkages Between Macroeconomic Developments and the Overall Stability of the Financial System

Given the developments in the external environment last year, more resources were devoted to understanding the links between macroeconomic developments and overall financial system stability. This included, for instance, understanding the relationship between economic growth and the impact of financial market turbulence on the health of financial institutions. In the past, MAS’ efforts in financial surveillance were divided across two departments - the Supervisory Policy Department (SPD) and ED. To minimise duplication and in order to pool resources and build up a critical mass of requisite skills and expertise in this area, the Financial Surveillance Division in SPD was merged with ED’s Financial and Special Studies Division. ED was given responsibility for assessing and monitoring overall financial system stability, while working closely with and supporting the Financial Supervisory Group (FSG).

This was achieved via the development of a systematic framework to monitor and assess overall financial system stability, which includes regular reporting on developments in the financial system both in Singapore and internationally. Leveraging on expertise in FSG, work in international groups such as the FSF, and informal discussions with the private sector, these reports highlight the linkages between the economy, financial institutions and financial markets, as well as those between individual financial institutions. For instance, in the aftermath of September 11, ED worked with FSG to conduct an internal assessment of the impact of such negative shocks on banks, insurance companies and securities firms.

Going forward, MAS’ analyses of systemic stability and financial market surveillance will be consolidated in a semi-annual financial report. MAS will also work on regular reports to benchmark the performance of Singapore’s financial system against similar global centres and to enable more systematic monitoring of trends. In this regard, a major effort is being made to improve the comprehensiveness of data that will help MAS to assess financial stability, as well as the efficiency by which this data is collected and managed.

On the external front, MAS has been preparing for its involvement in the joint International Monetary Fund– World Bank Financial Sector Assessment Program (FSAP), an external assessment of the systemic stability of Singapore’s financial system that will take place in late-2002 to mid-2003. To this end, the necessary logistical framework has been laid out, and preparations made to facilitate the upcoming stress tests and Reports on the Observance of Standards and Codes (ROSC) assessments that will be conducted around the FSAP missions.

[Strengthening Surveillance] [Deepening the Analytical Foundation] [In-depth Studies on Structural Trends and Issues] [Exploring Linkages] [What is the Financial Sector Assessment Program?]

[Economic Research and Policy Making] [Backdrop: Challenges to the Singapore Economy] [Response to the Challenges]

[Table Of Contents]