Published Date: 05 August 1999

"Singapore's Role as an International Debt Hub in Asia"

Announcement Of Approved Bond Intermediaries (ABI) Congratulatory Remarks By Mr Lim Hng Kiang, Minister For Health and Second Minister For Finance, MAS Penthouse

Date: 5 Aug 1999

Good morning ladies and gentlemen,

It has been almost two years since the Government began its review of the financial sector. We have announced several initiatives aimed at making Singapore a world-class financial centre in an increasingly competitive global marketplace. These policies have encouraged new and existing players to increase their activities in our financial markets.

2   Today, about 700 local and foreign financial institutions provide a wide range of financial services in Singapore. We are regarded as a place of choice for international financial institutions looking to establish an Asian presence. Twenty of the world's 25 largest banks are already represented in Singapore1. These international financial institutions bring with them world-class expertise and global outreach, and contribute significantly to further enhancing the capabilities and innovative products already available here. Our local banks may not rank among the world's large banks in size but they adopt their best practices. Just earlier this week, Moody's had given Singapore's banking system a high average financial strength of C plus. This puts Singapore's banking system in the same league as the United States. Looking ahead, Moody's had also noted that Singapore will "probably continue to boast some of the top-rated banks in Asia as it evolves."

3   We are pleased to note that the World Economic Forum Global Competitiveness Report ranks us among the top 10 most sophisticated financial markets2 in the world. While we are recognised as a major international financial centre, there is still room for our financial markets to grow, especially in our nascent bond market. Recognising that a vibrant bond market is important to the overall development of Singapore's financial sector, the Government has introduced various new policy initiatives to boost Singapore's debt markets and make the operating environment more conducive to bond players.

4   In particular, we introduced in 1998 a host of tax incentives to promote the development of an active bond market in Singapore. The package covered incentives aimed at debt issuers, financial intermediaries, as well as investors. We have also taken measures to boost the Singapore Government Securities market and to encourage foreign issuers of good credit standing to tap our Singapore Dollar markets. These efforts have helped to significantly boost the level of debt market activity here.

5   Over the last year, there has been a significant increase in the number of bond issues here. There is also a broader representation of issues by both foreign and local entities, as well as new issuers who had previously not been tapping the Singapore capital markets. Singapore-Dollar issuance by foreign entities and statutory boards ballooned from practically zero to about S$4 billion. For the first half of this year, total corporate debt issuance3 amounted to about S$9 billion. This is already the same amount as the total corporate issuance for the whole of last year.

6   Last year, a committee led by Mr Lam Chuan Leong, Permanent Secretary of the Ministry of National Development, was set up to spearhead bond issuance by the statutory boards. Looking forward, the Government will build on the statutory boards' efforts and continue to work closely with the industry to develop the operating environment. We will be forming a Debt Market Committee comprising representatives from MAS and other relevant Government agencies. This multi-agency committee, chaired by Mr Koh Yong Guan, Managing Director of MAS, with Mr Lam as Deputy Chairman, will drive and coordinate the overall strategies in developing the Singapore debt markets. The Committee will look at how public and private sector bond raising could be further encouraged, as well as continue to work closely with the industry to review and develop a regulatory and infrastructural environment that is conducive to the growth of a vibrant debt market.

7   While we have seen new activities in the Singapore Dollar bond market, our ultimate aim is for Singapore to play a key role as a leading international debt hub in Asia, dealing also in non-Singapore Dollar issues. And the first step would be to encourage even more international debt teams to base themselves in Singapore and to increase the level of international issues from Singapore.

8   In order to achieve the objective of drawing more international debt teams and capabilities into Singapore, we introduced the Approved Bond Intermediary or ABI Scheme in this year's Budget. Under this scheme, MAS evaluates a financial institution's debt origination and trading capabilities in Singapore on an overall basis. Only after substantial commitment of such capabilities is made would an institution be accorded the ABI status. Rather than being assessed on a transaction-by-transaction basis to qualify for the test of "substantial arrangement in Singapore", the debt issues arranged by an ABI would automatically qualify for the relevant bond market tax incentives.

9   We have seen very positive response to the ABI scheme and I am pleased to announce this morning, the first group of sixteen4 financial institutions accorded the ABI status. The banks gathered here today have proven expertise in debt origination, distribution and trading functions. Significantly, these sixteen ABIs have also demonstrated clear commitment to continue developing their fixed income capabilities and presence in Singapore.

10   The list represents a good mix of premier names, both local and foreign. Some of these banks already have well-established debt teams in Singapore. Others will be boosting their strengths and bringing in additional resources. In recognition of the range of capabilities and commitments pledged by the ABIs, the tenure of the awards vary up to 4 years in duration.

11   Let me congratulate the sixteen institutions accorded the Approved Bond Intermediary status. We believe that this first group of ABIs will form the critical mass to significantly enhance our position as a debt arranging and trading centre, and further encourage even more debt market activities into Singapore. We encourage you to take advantage of your ABI status to facilitate more international bond issues from Singapore and to increase the level of secondary trading here. We also welcome other leading financial institutions to join the ranks of the sixteen ABIs, and work together with the MAS to grow the Singapore bond market.

Thank you.

1 Based on rankings by Institutional Investor, August 1998.

2 World Economic Forum Global Competitiveness Report -- Variables Ranking on "Level of Sophistication of Financial Markets", 1999. Singapore has been ranked as the 9th most sophisticated financial market in the world.

3 Figure includes both Singapore Dollar and non-Singapore Dollar issues by corporate entities, including issues by supranationals and foreign entities, but excluding issues by statutory boards.

4 Complete list of financial institutions accorded the Approved Bond Intermediary status attached at Annex.