MAS International Advisory Panel Endorses Singapore's Financial Sector Reforms and Strategies
26 Jan 1999...Members of the Monetary Authority of Singapore's International Advisory Panel (MAS IAP) endorsed Singapore's financial sector reforms and strategies at the close of their one-and-a-half day inaugural meeting at the MAS. The panel, chaired by Mr J Y Pillay, comprised renowned leaders in international finance drawn from the US, Europe and Japan. (Please see Appendix.) The IAP discussed MAS' overall financial sector reforms, directions in banking, and specific strategies for the debt capital market and the equity and derivatives exchange. They also discussed the economic situation in Asia.
The IAP members were hosted to lunch yesterday by the 2nd Minister for Finance, Lim Hng Kiang, and had discussions with Senior Minister, Lee Kuan Yew, at a dinner reception later in the evening. This morning, they discussed the key conclusions of their deliberations with the Chairman of the MAS, Deputy Prime Minister Lee Hsien Loong.
Notwithstanding the difficult economic environment, the IAP urged Singapore to push ahead with its reforms and strategies for the financial sector because its solid credentials in the face of the current crisis made it an attractive choice for global financial institutions. Singapore could seize first mover advantage by moving quickly and decisively into new growth areas.
The IAP emphasised that the most critical role that MAS could play was to provide a conducive business environment that will attract international intermediaries. In this regard, the panel endorsed the shift in MAS' approach from regulation to supervision, and the greater flexibility accorded to better managed financial institutions. Members also expressed confidence that Singapore could add value regionally and internationally by providing a cost-efficient infrastructure and well-developed knowledge base, and encouraging international financial institutions to expand their base in Singapore.
There was consensus among IAP members that it was crucial to have a banking sector that was open to full foreign participation. The challenge was to do so while nurturing the development of strong local banks which would contribute to the depth and breadth of the financial centre. The liberalisation of the domestic banking sector must be properly paced and sequenced so as to achieve the objective. The panel thought that Singapore should allow foreign banks greater scope in providing retail banking services, while encouraging local banks to consolidate among themselves and explore strategic alliances with foreign institutions (including non-banks) to jointly seek opportunities in regional and international business.
IAP members saw good potential in developing Singapore as a leading international debt capital hub in Asia. They cited the heavy financing needs in the region and maturity mismatches inherent in the current excessive reliance on bank borrowing. IAP members characterised MAS' efforts to develop the asset management industry as a critical component of the overall strategy because it would provide a ready pool of investors and help reduce costs for both issuers and intermediaries. There were several factors that would need to be in place before the debt capital market can flourish. These included a well-developed derivatives market for swaps, strong credit enhancement capabilities, efficient and reliable payments and settlement systems, and adequate ancillary services, especially accounting and legal expertise.
IAP members supported Singapore's move to create a more business-oriented governance structure by demutualising and merging its cash and derivatives exchanges. As a next step, they suggested that the new integrated exchange explore strategic alliances with other regional exchanges in "win-win" type arrangements, and international partnerships that will enable Singapore to serve as the Asian leg of a global network of exchanges. The panel also urged MAS to explore initiatives to foster a vibrant venture capital industry.
The IAP noted that Singapore had set its sights high, but had made a good start towards achieving its vision of becoming a world-class financial centre. The panel believed that Singapore's markets and authorities had the credibility among financial players that was critical for the strategy's success.
MEMBERS OF THE MAS INTERNATIONAL ADVISORY PANEL
Mr J Y Pillay (Chairman)
Member of the Board of Directors of MAS
Mr Alfred R Berkeley
The Nasdaq Stock Market, Inc
Dr Rolf-E Breuer *
Spokesman of the Board of Managing Directors
Deutsche Bank AG
Mr Maurice R Greenberg
American International Group, Inc
Mr Toyoo Gyohten
Institute for International Monetary Affairs
Mr Jan Kalff
ABN AMRO Bank N.V.
Mr Yoh Kurosawa
Industrial Bank of Japan
Mr John Mack #
Morgan Stanley Dean Witter & Co.
Mr Michel Pebereau
Banque Nationale de Paris
Sir Brian Pitman #
Lloyds TSB Group plc
Mr John Reed *
Mr Douglas Warner *
J P Morgan & Co, Inc
Mr Gerald Corrigan # - ex-officio member
Goldman, Sachs & Co, Inc
* Participated via video-conferencing