Introduction

1    A very good morning to all of you. To our overseas guests and friends, may I extend a very warm welcome to you. I am very pleased to have been invited to this inaugural Euromoney South East Asia FX Forum.

2    The past year has been a challenging one, as most of you will readily acknowledge. The global financial turmoil, which began more than a year ago in the US, continues to unfold. Many consider the state of the market the worst since the great depression in the 1930s. In the latest World Economic Outlook Update, IMF revised its estimate of world growth to half a percentage point, the lowest since World War II.

Impact on Asian Markets

3    While the full impact of the US financial crisis was most severely felt in the US and Europe, the economic impact is now felt in Asia. Asian exports and industrial production fell sharply from October 2008 onwards, caused by increased bank deleveraging and economic slowdown in developed economies. Consequently, the deterioration in asset values further dampened consumer sentiment and purchasing power, and exerted further downward pressure on consumption.

Addressing the Crisis

4    Despite challenging economic conditions, the fundamentals of Singapore’s financial markets remain sound. Our banks have very low non-performing loans (NPLs), minimal exposure to toxic assets, and are well-capitalised. However, we are not letting our guards down and continue to monitor the financial centre closely for any systemic risk.

5    As Asia’s 2nd largest FX trading hub, our market continues to function well despite challenges in global capital markets. Results of the Singapore Foreign Exchange Market Committee (SFEMC) October 2008 FX survey showed that the trading activity for traditional FX in Singapore has remained healthy. Throughout the crisis, the Sing-dollar market generally functioned normally and had retained sufficient liquidity for transactions to take place. We are also pleased to note that many FX banks continue to hub their global or regional trading desks in Singapore.

6    As a leading international financial centre, MAS established a US $30 billion FX Swap agreement with the US Federal Reserve in October 2008. This swap facility is part of a global effort to provide US dollar liquidity to financial institutions through central banks in sound, well-managed and systemically important financial centres. In October 2008, the Singapore Government also announced that it would provide government guarantee for deposits of all non-bank customers. This followed similar measures by other countries in the region. The move ensured that banks in Singapore were able to operate on a level international playing field vis-à-vis banks in other jurisdictions which similarly guarantee deposits.

7    We are also pleased to note that industry players have embarked on efforts to address the riskier environment they operate in. For instance, we note the various initiatives by industry players to address counterparty credit risk in the OTC markets, through mechanisms such as multi-party clearing systems. Such initiatives enable greater transparency and risk management, which in turn promotes greater efficiency and strengthens the financial sector.
 
Preparing Singapore for the Future

8    While our banks are in good shape, there is still substantial risk in the global environment. Singapore is not impervious to these challenges; in fact, economic growth has slowed in the last two quarters of 2008. In our latest estimates, Singapore expects the economy to contract by 2% to 5% in 2009. To help Singapore cope with the downturn, the Government has introduced a decisive S$ 20.5 billion Resilience Package which includes numerous measures to help businesses. These include measures to stimulate bank lending such as the Special Risk-Sharing Initiative (SRI). The Government also introduced a S$5.1 billion Jobs Credits scheme to help cover manpower cost. 

9    The government wants to prepare for recovery and to emerge more competitive in the upturn. On this front, having the necessary skills and pool of talent is critical. As such, we encourage financial institutions to take this opportunity to invest in necessary expertise and skills training. To facilitate this development, enhancements were made to our training incentives funded under the Financial Sector Development Fund (FSDF). These enhancements include an increase in grant support for qualifying training programmes, as well as a broadening of our finance scholarship programme to include more discipline of studies.

Conclusion

10   In conclusion, as an international financial centre, Singapore will continue to play its part in addressing the global crisis. We are participating in various international and regional forums on ways to strengthen the international financial architecture, and maintain close engagement with our counterparts and other stakeholders. The collective effort by the international community, including governments and industry players is critical in addressing this crisis.

11   These are extraordinary times. Forums like this will certainly be an effective platform for exchanging ideas and views. On this note, I would like to wish the conference a great success. Thank you.