Published Date: 10 September 2009

Opening Remarks By Mr Ng Nam Sin, Executive Director, Monetary Authority of Singapore, at the IBF Wealth Management Seminar 2009, 10 September 2009, Pan Pacific Hotel

A very good morning to everyone. For guests who have joined us from overseas, a very warm welcome to Singapore.

Optimism and New Landscape

2   In recent months, we have seen more optimism about an economic recovery. Indicators such as Industrial Production, Manufacturing Purchasing Managers Index and Merchandise Exports returned to modest growth at the global level in the second quarter this year[1]  .

3   While the worst may appear to be over for the global economy, the outlook remains uncertain. We thus need to continue to monitor the situation closely.

4   However, what remains clear is that in the aftermath of one of the most serious global recession that the world has ever experienced, the economic and financial landscape have fundamentally changed. Pertaining to the financial sector, three key trends are redefining the new landscape. Allow me to elaborate. 

Regulations shift towards stringency

5   Firstly, regulation shifts towards more stringency. Globally, regulators are tightening rules on financial institutions and markets, including increased capital and solvency requirements. Compensation structures of bankers are now under scrutiny.

Investor shift towards 'flight to safety'

6   Secondly, investor's "flight to safety". Investor behavior is also changing. With trust and confidence badly shaken, they are seeking more transparency and trusted investment advice that is more aligned with their long term interest. The “flight to safety” will bring into focus, the need for quality, independent and holistic advice. Having experienced the crisis, preservation of wealth even in a volatile environment is now an important client consideration.

Reshaping of business model

7   Thirdly, reshaping of private banking business model. With the shift in investor mindset and increased regulations, private banks have to re-examine their business models. We understand that to rebuild trust, private banks are adopting a more client-centric, advisory-led approach for a more sustainable business model. Areas of focus may be in aligning its range of services/products with clients' long term interest, raising the competence of their relationship managers (RMs), and reviewing compensation structures.

Emerging Stronger as a Trusted Financial Centre

8   These three key trends - shift in regulations, investor behaviour and business model share a few underlying factors - in particular ensuring financial sector resilience, and building trust and confidence among investors. Here, Singapore's strong fundamentals put us in a good position to achieve this. Singapore has a reputation for having a regulatory regime of very high standards and a robust governance and legal framework. These underscore our standing as a stable and trusted international financial centre. Despite the severe global conditions, our strong fundamentals have helped us weathered the crisis well. In its 2009 annual review[2] of the Singapore economy, the IMF attributed Singapore's resilience largely to our robust supervision and regulation, and local financial institutions' internal risk management.

9   However, as the landscape changes and new demands evolve, it is important not to be complacent. Trust and good governance require consistent reinforcement. Regulations need to keep pace as industry develops. On our part, MAS is enhancing Singapore's strength as a trusted financial centre, in two key ways: first, maintaining a sound and progressive regulatory regime; second, maintaining confidence of investors through raising competency and standards of conduct.

Sound & Progressive Regulatory Framework
10   On the regulatory front, MAS contributes to discussions on shaping new standards at international bodies such as the Financial Stability Board and the Basel Committee on Banking Supervision.  Should the debate results in a movement towards more stringency, Singapore is in a good position to align ourselves with these standards. However, while we do this, we will also be mindful of maintaining a balanced approach and not to 'over-swing' the regulatory pendulum. 

11   Additionally, to protect the integrity of our financial system, we will continue to operate a rigorous regime against money laundering and financing of terrorism. In line with international best practice, and as a member of the Financial Action Task Force, we require all financial institutions to institute strict procedures including the need to identify and know their customers. These high standards serve as very strong deterrence against the conduct of criminal and illicit activities through our system. In the same vein, Singapore also endorsed the OECD Standard for Exchange of Information in March this year, after it had been supported as the new international standard by the UN Committee of Tax Experts in October 2008. We are amending our laws to effect this Standard. Various tax treaties are being updated to incorporate this Standard. 

Enhancing Investor Confidence

12   Let me move to the issue of enhancing investor confidence. To enhance investor confidence in our financial system, among various initiatives, MAS issued the Guidelines on Fair Dealing in April this year. These guidelines emphasise the responsibilities of the Board and Senior Management of financial institutions to deliver fair dealing outcomes to customers. It goes beyond mere compliance with regulatory requirements. Developing a fair dealing culture requires a mindset change. The Board and Senior Management bear primary responsibility for ensuring that they embed fair dealing outcomes in their business practices. Private banks are strongly encouraged to apply the principles in the Guidelines to their customers and products.

13   To rebuild investor's trust, another key area is the development of competent, and trusted financial advisors. The recent PricewaterhouseCoopers' Global Private Banking and Wealth Management Survey reveals that becoming the client's “trusted advisor” is the best way to acquire and retain assets in today's volatile world. Having gone through the crisis, clients are asking more difficult questions, demanding higher-quality advice, and seeking assurance.

14   However, the Survey also suggested that RMs may not have the experience or training to deal with these new demands. Client relationship skills have been found more wanting during such volatile environment, when RMs have to manage and be more transparent on volatile returns, and at times, deliver bad news to clients.

15   Re-skilling of RMs is therefore most critical. They need to possess wider and deeper knowledge of product and service offerings - to deliver quality advice and meet holistic needs of clients under any market conditions. Given this, the industry should make a concerted push in requiring their RMs to continually enhance their competence. To encourage training, MAS recently increased the co-funding support for FICS accredited programmes to 90%, and extended support to financial institutions that adopt FICS framework for their in-house training. As an added impetus, MAS is also consulting closely with the industry to see how we could collectively drive the effort to strengthen competency in a coordinated manner.

16   Competence and right behaviour go hand-in-hand. The "back-to-basic" demand of clients may imply that a transaction-driven business model will have limited revenue upside potential given current environment. Over a longer term, it could also be volatile. Instead, a business model that focuses on advisory excellence will build trusted and long-term client relationships that could ride through market downswings, and sustain revenue growth. If the industry shares this assessment, private banks should align their business models and remuneration structure of RMs, to ensure that it remained consistent with acting in the long term interest of their clients.


17   If institutions refocus on their clients and rebuild trust, they will find themselves in good stead to rebound and attain sustainable growth in the new era. If you are sitting in Asia, this is particularly true.

18   While global conditions remain uncertain, what is clear is that Asia will play a key role in the recovery of the global economy. The IMF forecasts that emerging Asia could grow by at least 5% in 2009, a remarkable figure compared to 3.5% contraction of G7 economies. Financial sector players who are able to get their fundamentals right and stay engaged in this region, will be able to ride well on Asia's rebound.

19   Singapore's reputation as a trusted and competitive international financial centre is built upon our strong fundamentals - a sound and progressive regulatory regime, and a robust legal and corporate governance framework, underpinned by a pro-business operating environment.  The latest World Economic Forum (WEF) Report released on Tuesday further supports Singapore's standing. Singapore jumped two places to become the third most competitive economies in the world, and remain the most competitive in Asia. This is noteworthy given the very difficult economic environment Singapore has faced over the last year.

20   We believe that these core attributes puts us in a good position to grow further. As we strengthen our regime as a trusted location for financial services, it also enhances our proposition for wealth management activities. At the institution level, we believe many private banks are re-adjusting to adapt to the new environment based on building trust and long term relationship. With this, and together, we can ensure we emerge stronger from this crisis.

21   With this, I wish all of you a fruitful seminar. Thank you.

[1]  World Economic Outlook Update, IMF, July 8, 2009

[2]  2009 Article IV Consultation with Singapore, IMF, 31 August 2009