Published Date: 22 May 2009

Prime Minister's Office (Monetary Authority of Singapore)

Addendum to the President’s Address

Mr Goh Chok Tong

Senior Minister and Chairman, MAS

1   The past year has witnessed a period of extraordinary stress in the global financial system and a deep economic recession worldwide.  Although the global financial condition has stabilised, the situation is fragile and we need to remain vigilant.

2   The Singapore economy weakened considerably from the second half of 2008. Meanwhile, headline inflation came down significantly from its peak in mid-2008. MAS’ monetary policy objective is sustainable, non-inflationary economic growth over the medium term. This will underpin confidence in the Singapore Dollar. In light of increased uncertainties in the economic environment, MAS will bolster our surveillance and analytical framework to incorporate more real-time information and enhance our assessment of industry and corporate level developments to complement macroeconomic projections.  We have also strengthened our ability to ensure adequate market liquidity in Singapore’s banking system even during periods of heightened volatility and general risk aversion in global financial markets.

3   The financial  crisis has highlighted the importance prudent supervision of financial activities. Although not directly affected, financial institutions (FIs) in Singapore can be susceptible to risks of contagion from developments elsewhere and to second round effects of the economic slowdown. MAS will continue to work with FIs to strengthen their risk management systems and processes. We will embark on thematic reviews and stress tests to assess the risks of FIs, and fine-tune measures for FIs to mitigate financial stresses, such as increasing prudential buffers. We will also intensify our ongoing dialogues with the home regulators of foreign FIs which operate here, so as to share information about the safety and soundness of these institutions. Furthermore, we will enhance our crisis management capabilities to minimise fallout in the event of FI failure.

4   To complement the supervision of individual FIs, MAS will step up our macro-prudential surveillance.  This entails enhancing our gathering of market intelligence, and analysing broader systemic risks including the mechanisms through which risks in one segment of our financial system can be transmitted to another. 

5   Concurrently, MAS will position Singapore’s financial centre to emerge stronger post-crisis. MAS will study the revisions being proposed internationally to existing capital adequacy frameworks, and make appropriate amendments to our rules. In addition, we will finalise enhancements to the regulatory framework for the sale and marketing of investment products. This is to promote more effective disclosure and fair-dealing in the sales and advisory process. We will continue to work with our stakeholders to strengthen the corporate governance of listed companies and to deliver relevant financial education programmes under MoneySENSE.

6   Emerging stronger from the crisis entails efforts to develop our financial centre as well. Singapore’s sound regulatory framework and well-respected judicial system will enhance our proposition as a trusted centre for asset management and risk management.  Whilst growth momentum may moderate in the next few years, the Asian growth story remains intact over the longer term and Asia will continue to be an important region for asset management opportunities. Next, the risk appetite of global banks will remain muted for some time. Companies in Asia are therefore turning to domestic loan and regional capital markets for their funding needs. We can ride on this by positioning Singapore as a leading international marketplace for fund-raising, risk management and trading of local currency securities.  MAS will continue to support the development of market infrastructure and products that are relevant to players based in Asia. Finally, we will work on initiatives to encourage FIs to continue investing in manpower retention and talent development, so as to ready themselves for the upturn.