Media Releases
Published Date: 24 August 1998

Financial Sector Remains Resilient Despite Slowdown;


MAS' efforts to reform the sector on track and reaping results

Singapore, 24 August, 1998.. The Managing Director of the Monetary Authority of Singapore, Mr Koh Yong Guan, today said that Singapore's financial sector remains resilient in the face of the economic slowdown.

Speaking at a press conference to release MAS' annual report for financial year 1997/98, Mr Koh said: "The financial position of the local banks remains sound despite the decline in profitability. We have monitored the exposure of the local banks to the region as well as to the property sector in Singapore and we are comfortable with their individual positions."

"Moody's Investor Services has ranked Singapore banks seventh in the world and first in Asia in terms of financial strength," Mr Koh said.

"The financial sector will continue to face a rough ride in the short to medium term because of the regional economic difficulties. But it will remain resilient because of its strong foundation. This resilience was not achieved overnight, but is the result of many years of careful husbandry," he said.

"Our focus is really on the medium to long term, when the economic situation in Singapore and the region improves and a transformed financial landscape offers new opportunities for growth," said Mr Koh. "This is why we are earnestly pressing on with the financial sector reform effort," he said.

Positioning Singapore as a World-Class Financial Centre

Mr Koh said that MAS' vision was to help make Singapore a world-class financial centre, offering a wide range of services and products. The key strategic thrusts were to further develop the asset management industry, deepen and broaden the capital markets, and build an internationally competitive banking industry.

"To achieve this vision, MAS is playing a more proactive role in promoting the financial sector as well as taking a more strategic approach to developing our markets, " he said. "Indeed, we have met many financial institutions in Singapore and from around the world to explore opportunities for doing business here. Of these, we have a pipeline of about 100 projects that could possibly be committed over the next 2-3 years, " said Mr Koh.

"These institutions are positioning themselves for opportunities when the recovery comes. They have been attracted to Singapore because of our sound fundamentals and conducive regulatory environment. They have also been encouraged by the recent initiatives that have been announced to develop the financial sector," said Mr Koh.

In addition to continuing to make marketing trips to the US, Europe and Asia, MAS is planning to set up overseas promotions offices in London and New York.

Mr Koh said that the financial sector reform process was progressing well. "In undertaking this process, we have been actively consulting the industry for views. The recommendations of the three subcommittees under the Financial Sector Review Group, namely the Banking Disclosure Committee, the SES Review Committee, and the Corporate Finance Committee, have been very constructive and provided much valuable input into the reform process," he said.

"As a follow-up to the SES Review Committee, we have constituted a Committee on Governance of Exchanges. The Committee will study international trends in exchange ownership and operations, establish the most suitable governance model for SES and SIMEX, and recommend an appropriate transition path from the current situation," said Mr Koh. The Committee is expected to make its preliminary recommendations by mid-October and final recommendations by mid-December.

[The terms of reference and composition of the Committee are attached.]

The reforms to-date have covered a range of financial markets and industries. Some of the key initiatives are as follows:


  • raised bank disclosure standards
  • halved minimum cash balance to 3%
  • launched real time gross settlement system for interbank payments


  • liberalised investment limits on Singapore general insurance and non-investment-linked life insurance products
  • reduced paid-up capital requirement for captive insurers
  • extended 10-year tax exemption for income from offshore marine hull and liability business

Fund Management

  • targeted to place out $25 billion of GIC funds for external fund managers to manage over next 3 years; year to-date, $3 billion has been committed and another $3 billion is under consideration for outplacement
  • revamped CPF investment scheme and liberalised non-CPF unit trusts to encourage investment in unit trusts
  • reduced financial requirements for foreign companies to set up as investment advisers in Singapore
  • enhanced tax incentives for fund managers and unit trusts

Equity and Futures Markets

  • relaxed conditions for foreign-owned companies to list in S$ on the SES
  • approved launch of new equity derivatives on SIMEX, namely Singapore, Malaysian, and Thai stock index futures
  • issued a new best practices guide on audit committees and securities dealings
  • renewed tax holiday for SIMEX for another 5 years

Bond Market

  • issued $1.5 billion of 10-year Singapore Government Securities (SGS) to extend benchmark yield curve
  • allowed foreign entities of good standing to issue S$-denominated bonds in Singapore
  • allowed banks to transact S$ repurchase agreements in Singapore Government Securities (SGS) of up to $20 million with non-residents
  • introduced tax incentives to encourage origination and trading of debt securities in Singapore

MAS was working towards the implementation of several other reforms that have been announced, including the adoption of a risk-focused approach to bank examination, increasing the issue of SGS so as to create a larger free float of SGS that can be traded in the secondary market, and progressively deregulating the commission structure of the stockbroking industry.

[A comprehensive set of tables on the key financial sector reform initiatives implemented to-date and being currently worked out is attached.]

Year 2000 Readiness On Track

As part of the effort to develop Singapore as a world-class financial centre, MAS has engaged Arthur D Little to undertake a broad review of the IT infrastructure for the financial sector. Mr Koh said that one of the one concerns in this area was to prepare the financial sector for Year 2000. "Indeed, getting ready for Year 2000 is one of the biggest immediate challenges facing the financial industry throughout the world," he said.

Mr Koh said that MAS was taking decisive steps to co-ordinate industry-wide Year 2000 compliance. Singapore's financial sector had been preparing for Year 2000 since early 1997.

"We are confident that the financial system as a whole will be resilient in the transition to Year 2000. At the same time, we have mapped out supervisory measures to restrict the activities of those who cannot meet our standards for Year 2000 readiness," Mr Koh said.

Mr Koh said that a series of Year 2000 readiness tests has been scheduled for the various industries. The Stock Exchange of Singapore had just successfully completed a test run on its trading system for Year 2000 readiness on 23rd August. SIMEX was scheduled to undergo a test in October and MEPS in the fourth quarter of this year. The entire financial sector will be undergoing a Year 2000 readiness test in the first quarter of 1999. "This landmark test will help MAS to identify weaknesses in the system as well as the financial institutions that require extra assistance and supervision," said Mr Koh.

[Details of MAS' Year 2000 Readiness Plan are contained in a separate media release Financial Sector Expects Smooth Transition to Year 2000.]


  • Raised Bank Disclosure Standards

    Discontinue practice of maintaining hidden reserves.

    Provide details on loan loss provisions.

    Disclose off-balance sheet items in notes to accounts.

    Disclose significant exposures.

  • Clarified and Liberalised Guidelines on S$ Loans for Regionalisation Projects
  • Lowered Minimum Cash Balance (MCB) from 6% to 3%
  • Raised Limits on Offshore Banks' S$ Loans to Residents from $200 million to $300 million
  • Launched Real Time Gross Settlement System for Interbank Payments
  • Liberalised Investment Limits on Singapore General Insurance and Non-Investment-Linked Life Insurance Funds
  • Put in Place Easier Operating Environment for Captive Insurers

    Reduced paid-up capital requirement from $1 million to $400,000.

    Gave blanket approval for captive insurers to write certain non in-house risks.

  • Enhanced Tax Incentives

    Extended 10-year tax exemption for Singapore-registered insurers in respect of income from offshore marine hull and liability business.

Fund Management
  • Committed to Place Out $25 billion of GIC Funds over Next 3 Years for External Fund Managers to Manage [Placed out $2.8 billion since Mar 98; another $3.2 billion by Apr 99.]
  • Revamped CPF Investment Scheme

    Set new selection criteria for CPF-approved fund managers.

    Set new investment guidelines and introduced disclosure requirements for CPF-approved unit trusts.

  • Liberalised Guidelines for Non-CPF Unit Trusts

    Introduced new investment, borrowing and advertising guidelines.

    Removed minimum investment requirements for unit trust regular savings plans.

  • Reduced Entry Requirements for Foreign Companies Setting Up as Investment Advisers in Singapore

    Reduced minimum shareholders' funds from $500 million to $100 million.

    Reduced minimum global funds managed by parent company from $5 billion to $1 billion.

  • Enhanced Tax Incentives

    Abolished withholding tax on unit trust distributions.

    Extended tax exemption to unit holders' distributions made out of capital gains.

    Exempted from tax fund managers who manage more than $5 billion in Singapore.

Equity and Futures Markets
  • Eased Conditions for Foreign Companies to List in S$ on the SES
  • Removed Limit on Investments in Foreign Currency-Denominated Shares by CPF-Approved Unit Trusts
  • Approved Launch of New Equity Derivative Contracts

    SIMEX will launch MSCI Singapore Stock Index futures (in Sep 98), Dow Jones Malaysia Stock Index futures (in Oct 98) and Thailand Stock Index futures (in Nov 98).

  • Widened Scope of Activities for Stockbrokers

    Reviewed SIMEX membership structure to allow SES members to apply for SIMEX membership so as to market and trade SIMEX's equity index contracts.

    Facilitated applications by stockbroking firms for investment adviser licences.

  • Introduced New Best Practices Guide on Audit Committees and Dealing in Securities
  • Enhanced Tax Incentives

    Extended certain tax incentives for venture capital funds for a further 5 years beyond the current maximum of 10 years.

    Renewed tax holiday for SIMEX for another 5 years.

    Suspended stamp duty on securities transactions for 1 year wef 30 Jun 98.

Bond Market
  • Issued $1.5 billion of 10-year Singapore Government Securities (SGS)
  • Allowed Foreign Entities to Issue S$-Denominated Bonds in Singapore
  • Allowed Banks to Transact S$ Repurchase Agreements of up to $20 million with Non-Bank Non-Residents
  • Allowed Banks to Transact S$ Currency and Interest Rate Swaps with Special Purpose Vehicles for Securitising Mortgages
  • Allowed CPF-Approved Unit Trusts to Invest in High Grade Bonds
  • Introduced Tax Incentives to Encourage Origination and Trading of Debt Securities in Singapore


  • Implement Risk-focused Approach to Bank Examinations

    Conduct more focused and regular inspections to distinguish stronger banks from weaker ones.

  • Review Investment Guidelines for Investment-Linked Insurance Policies
  • Enhance Operating Environment for Captive Insurers

    Study reciprocal law to allow captives to move their business from other domiciles to Singapore without having to liquidate the existing captives and vice versa.

  • Introduce New Reinsurance Products

    Study the actuarial and accounting issues relating to the introduction of specialised pioneer products such as alternative risk transfer products.

Fund Management
  • Consolidate Unit Trust Regulation in MAS
  • Review Trustees Act

    Relax investment restrictions on statutory boards, private pension funds and authorised unit trusts.

    Delink investment limits under CPFIS from Trustees Act.

    Put in place regulatory framework for private pension funds.

  • Introduce Regulatory Framework for Independent Financial Advisers
  • Introduce Public Education Programme for Unit Trusts
  • Introduce Code of Ethics for Fund Managers
  • Create Conducive Environment for Indigenous Boutique Fund Managers
  • Introduce Training Programmes to Develop Local Fund Management Expertise
Equity and Futures Markets
  • Progressively Deregulate Commission Rates
  • Progressively Open Up to Foreign Participation in the Stock-broking Industry
  • Legalise Share Buy-Backs
  • Liberalise Employee Share Option (ESOP) Schemes
  • Widen Product Range in Equity Market

    Expand the SES options market by introducing options on more stocks.

    Introduce new products (eg stock index options, country basket of shares, listed property trusts/real estate investment trusts).

    Develop an electronic bulletin board/organised OTC market on SES for trading foreign securities.

  • Review Ownership and Governance Structure of the SES
  • Shift from Merit-Based Regulation Towards Predominantly Disclosure-Based Regulation
  • Consolidate Securities Regulation in MAS to Reduce Duplication and Improve Efficiency
Bond Market
  • Increase Government Debt Issues and Announce a Regular Calendar of Issues
  • Increase Bond Issues by Statutory Boards like JTC, PUB, and HDB
  • Promote Asset-Backed Securities Market

    Resolve legal, regulatory and tax issues relating to asset-backed securities.

    HDB is considering the issuance of mortgage-backed securities.

  • Introduce Regulatory Guidelines for Underwriters and Dealers and Trading Rules for Debt Securities
  • Develop Efficient Clearing System for Corporate Bonds


Overall vision

The vision is for SES and SIMEX to become leading exchanges in Asia, well-positioned for:

  • capturing co-operation opportunities with other international exchanges,
  • offering maximum investor choice and value in products and services, and
  • enabling the achievement of the broader strategic objective of making Singapore a world-class financial centre.

Terms of reference

The Committee on Governance of Exchanges will:

  1. study international trends in exchange ownership and operations;
  2. establish the most appropriate models for the ownership, functional organisation and governance of SES and SIMEX; and
  3. recommend the best mechanics for the transition from the current models to the proposed models, including timing and sequence of changes.

List of committee members

Tharman ShanmugaratnamDeputy Managing Director, MAS
Lim Choo PengPresident, SES
Ang Swee TianPresident, SIMEX
Financial Market Participants
Elizabeth SamDy Chairman, SIMEX
Goh Yew LinExecutive Director, GK Goh
Low Check KianMD, Merrill Lynch
Seck Wai KwongGM, Lehman Brothers
Philip PillaiSenior Partner, Shook Lin & Bok
Lucien WongPartner, Allen & Gledhill
Alan LimMD, Prudential Portfolio Managers
Seow Kok LeongSenior Director
Securities and Asset Management/ Financial Futures Division
Tan Kim KwaySenior Director
Corporate Finance Division

Time frame

The committee will submit its preliminary recommendations by mid-October, and a final report by mid-December 1998.