Remarks by DPM Lee Hsien Loong
To Commemorate The Opening Of The Monetary Authority of Singapore's Overseas Promotion Offices, London
Date: 15 Apr 1999
Ladies and Gentlemen
1 I am happy to welcome our guests, both here and in New York via video-conference link, to this simultaneous opening of the MAS' overseas promotion offices in London and New York. We are honoured that so many distinguished members of the financial community on both sides of the Atlantic have joined us today. I would like to thank Mr William McDonough, President of the Federal Reserve Bank of New York for sending us a message of congratulations on the opening of our New York office. The New York Fed has provided the Monetary Authority of Singapore much support over the years and I look forward to our continued close cooperation. I am pleased that Mr Terence Checki of the New York Fed is able to grace our event today.
2 . The financial industry worldwide is undergoing rapid change. Capital markets have become much more globalised, beginning with foreign exchange and debt markets and now increasingly equity and derivative markets as well. Rapid advances in financial and information technology have generated sophisticated new products and techniques, and growing economies of scale. These developments provide tremendous opportunities for industry practitioners, but also formidable challenges for the regulators.
3 The Asian economic crisis has engendered much doubt and soul-searching about the wisdom of this headlong globalisation. Its severity and scope has shaken confidence in the rationality, stability and safety of the global financial system. Investors and lenders, central bankers and finance ministers, the IMF and World Bank have all learnt lessons from the crisis. All have been forcefully reminded of the need for higher standards of supervision, disclosure and transparency, the hazards of over-leverage, whether by companies or countries, and the systemic risks of short term fund flows in and out of economies that lack strong financial institutions and the sophistication and means to manage the flows.
4 . The crisis has tempered the optimistic belief that the market always works for the best, with minimum interference from governments and regulators. Countries are reassessing the benefits and risks of the globalisation of financial markets. But they will not return to an international regime of highly regulated, compartmentalised national financial systems such as prevailed under Bretton Woods. The benefits of rationalisation, consolidation, economies of scale and exploitation of IT are too valuable to ignore. The long-term trend towards more responsive and market-oriented regulation will continue, especially in the developed countries.
5 Singapore began its push to liberalise and further develop its financial sector before the Asian crisis hit. The MAS sought to operate with a lighter touch, to shift from regulation to supervision, and to allow more free play for institutions and market participants to innovate, take risks, and accept both the rewards and the consequences. In the aftermath of the crisis, some of the affected countries in Asia have apparently been doing the opposite, tightening up lax supervision and controls. But after carefully considering the matter, we decided to press ahead. Let me explain why.
6 Singapore aims to be a leading financial centre in our time zone, linked to other major financial centres of the world. To be up among the major players, we have to deepen and widen our markets. We must attract more players and activities to Singapore, and provide a conducive environment where a more sophisticated and entrepreneurial culture can flourish. We cannot afford to stand still while the rest of the world moves ahead, especially the developed countries. Otherwise other financial centres will take over our role and we will become irrelevant.
7 We intend to maintain the high standards of financial supervision that we have established over many years. We will continue to uphold the integrity and transparency of our markets, and deal firmly with transgressors. But at the same time we will give the private sector full opportunity and incentive to innovate, compete, and match best practices elsewhere. MAS will work more closely with the industry as we liberalise, to appreciate better the rapid developments and industry concerns.
8 The crisis gives us a window of opportunity to make these changes. Our economy is less affected than many others. Our banking system is sound. We are not beset by urgent problems of restructuring and recapitalisation. We have the resources and the ability to pursue long term policies now, and emerge ahead when the region recovers. Hence we are proceeding step by step, not to create a big bang, but to make careful incremental changes that cumulatively will develop our financial centre.
9 One element of this new approach is for the government to promote Singapore more actively as a financial centre. We set up a Financial Sector Promotion Department within MAS for this purpose, separate from the departments supervising the financial industry. It seeks to do for the financial industry what our Economic Development Board does for manufacturing and other services - provide a one-stop service, administer tax incentives, and help the industry to grow in Singapore.
10 This is a change from the way MAS used to operate, but other financial centres too are similarly actively promoting themselves. Examples are the Industrial Development Agency of Ireland that promotes Dublin, the Hong Kong Monetary Authority, the Frankfurt Finanzplatz, the Paris Europlace, and in London the British Invisibles. I understand Australia too is considering setting up a similar body.
11 To implement our new approach, MAS must stay in close touch with trends and developments in leading financial centres in Europe and the United States. It is therefore timely for MAS to establish its new representative office in London and expand the role of its existing office in New York. Their task will be to foster greater understanding and cooperation between the MAS and central banks, enable MAS to communicate more effectively with the international financial community, service financial institutions which have operations in Singapore, and attract more financial activities to Singapore. If you have any operations, proposals, queries or problems concerning Singapore's financial industry, I hope our representative offices will be of help to you.
12 Finally, may I thank you again for gracing our opening today. Singapore looks forward to opportunities to work together with you and your institutions in the future.