Media Releases
Published Date: 02 August 2002

MAS Stays on Course During Difficult Year for Economy and Global Financial Markets

Singapore, 2 August 2002. Sound macroeconomic management, a regulatory and supervisory regime that is responsive and in tune with new developments and trends are the factors that helped the Monetary Authority of Singapore (MAS) to stay the course during 2001/2002, a financial year marked by difficult economic and market conditions.  That was the message from Mr Koh Yong Guan, MAS Managing Director, at a press conference today on the release of MAS 2001/2002 annual report.

2   Mr Koh reiterated the view that the external economic environment had improved since the last quarter of 2001.  This reflects robustness in consumer spending and a reduced pace of inventory liquidation in the US.  MAS expects Singapore's real GDP growth to come in at the upper half of the official forecast range of 2 to 4 per cent in 2002. He said that to facilitate continued economic recovery, MAS is maintaining its current policy stance of zero percent appreciation in the S$NEER for the second half of 2002. This was enunciated in MAS' Monetary Policy Statement on 11 July.

3   However, Mr Koh cautioned that though the economic outlook is encouraging, global financial market conditions are still volatile and uncertain.  MAS will continue to keep a close watch on global economic trends to assess their likely impact on Singapore's economy.

4   Turning to MAS' annual report 2001/2002, Mr Koh said MAS' total assets as at 31 March 2002 totalled S$129.7 billion compared with S$129.5 billion a year ago. MAS' profit after provisions for the financial year ended 31 March 2002 was $641 million, S$1.4 billion lower than the previous year. This can be attributed mainly to lower interest income and the generally unfavourable conditions in the financial markets.

5   On financial sector regulation and development, Mr Koh said MAS had embarked on a series of initiatives in the past 12 months. The Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) were passed by Parliament last year and will fully come into force by the third quarter of 2002.  MAS has also completed the first phase of its study of deposit insurance and concluded that it is suitable for Singapore.  MAS will be issuing a public consultation paper that sets out the objectives and the key parameters of the deposit insurance scheme.  The consultation process, with industry and interested parties will commence next week.

6   On the developmental front, Mr Koh said that despite the economic uncertainties of last year, MAS pressed on to further liberalise the financial sector.  Rules governing the Singapore dollar non-internationalisation policy were further relaxed to ease access to Singapore dollar credit by non-residents wishing to invest in or tap our capital markets.  "Moving forward, MAS is studying ways to enhance integrated supervision of the financial sector.  We are, after all, one of the world's first integrated regulators and we will continue to harmonise our regulations, enhance supervisory processes and ensure that our resources are deployed in the most effective way," said Mr Koh.

7   "Sound corporate governance and effective market discipline will complement MAS' prudential oversight, in fostering the safety and soundness of financial institutions," Mr Koh said.  MAS has taken several initiatives to further enhance corporate governance and information disclosure in the year under review. The MAS will now require banks to change auditing firms every five years.  The local banks have also decided to implement more stringent corporate governance requirements with effect from their AGMs held from 1 January 2003.  MAS will continue to pay close attention to corporate governance issues and will consult with industry on major initiatives.

8   During 2001/2002, financial institutions in Singapore continued to consolidate.  This was in line with global trends, where a major consolidation of the financial services industry is ongoing.  "Notwithstanding the consolidation in the financial sector, Singapore financial sector value-added grew 2.2 per cent last year, compared with 4.6 per cent in 2000.  The pace of expansion in the value-added during a generally difficult year shows that Singapore's financial sector remains on a dynamic and competitive footing," Mr Koh said.