Singapore Money Markets: Increased Vigilance
Asian banking systems have remained resilient due to their continued positions of excess liquidity and relatively lower exposure to the US housing market. However, international financial centres such as Singapore have not been, and cannot be, immune to the effects of global deleveraging. Tighter credit conditions in the Asian Dollar Market inevitably spilled over into local currency money markets in Asia.
To ease pressures in the Singapore dollar money market, especially going into the quarter-end and year-end periods, MAS kept a higher level of liquidity in the banking system through its market operations and enhanced its monitoring of market functionality through closer contact with financial institutions. MAS also reassured financial institutions that we would continue to anticipate the market's funding needs and would consider any unique liquidity needs of individual banks, on a case-by-case basis.
Chart 8 illustrates the impact of higher USD borrowing rates on the Singapore dollar market in September 2008, following the collapse of Lehman Brothers towards the quarter-end period.