Distinguished Guests, Ladies and Gentlemen,

Introduction

1   Good morning. It is an honour for me to have the opportunity to address this prominent gathering of treasurers, money managers, repo and collateral managers at this inaugural Global Securities Financing Asian Conference. 

2   I understand that the event has a strong following in Europe, which is currently in its fourteenth year. Hence, I would like to congratulate Clearstream for its success in this initiative and in bringing global and regional key market participants and stakeholders together to this Asian event. With Singapore poised as the risk management hub of Asia, it is timely that Clearstream hosts its Global Securities Financing Conference for the first time in Asia, and particularly in Singapore.  

Liquidity Management – Learning from the Crisis

3   Increasing globalisation of banks and other financial institutions in recent decades has left banks with the challenge of managing liquidity in multiple currencies and jurisdictions.  This ability to effectively manage liquidity across borders was severely tested in the recent financial crisis which witnessed unprecedented dislocations in funding markets and a marked reduction in the willingness to take on counterparty risk.  Asian jurisdictions were not spared either as these tensions in cross-border funding markets spilled over to the domestic funding markets.

4   The experience highlighted the growing importance of secured funding and of collateralisation as a widespread risk mitigation measure in liquidity management. It therefore comes as no surprise that demand for expertise in repo and collateral management is expected to escalate in Asia in the coming years. 

Measures by Central Banks

5   Even amongst central banks, collateralisation has played an increasing role as part of an arsenal of policy measures to alleviate tensions in domestic money markets.  The Federal Reserve’s Term Auction Facility and the Bank of England’s Special Liquidity Scheme are examples of how wider ranges of collateral could open up potential new sources of central bank liquidity and access to more marketable securities to market participants. 

6   Within Singapore, MAS had also taken steps to broaden the breadth of collateral usage in Singapore by increasing both the number of central bank counterparties and the range of acceptable collateral.  Since 2008, MAS had introduced various enhancements to the MAS Standing Facility as part of ongoing measures to further strengthen the resilience of financial markets.  Besides expanding eligibility to all banks that participate in the MAS Electronic Payment System, eligible collateral in the Standing Facility was widened to include AAA-rated S$ debt securities issued by supranationals, sovereigns, and sovereign-guaranteed companies, in addition to Singapore Government Securities.

7   These measures had spurred a number of successful Singapore dollar debt issuances from renowned issuers like the World Bank and KfW Bankengruppe, enhancing the depth of good quality collateral available in Singapore.  Not letting up on the momentum generated, MAS will be continuing efforts into reviewing how the range of eligible collateral for the Standing Facility can be widened even further.

Strengthening Risk Management and Credit Analysis

8   To strengthen Singapore’s risk management and credit analysis capability, our institutes of higher learning are also actively building their research capabilities to achieve academic research breakthroughs that could benefit the industry. As part of its objective to be the global credit risk research centre, the NUS Risk Management Institute (RMI) is currently embarking on a large-scale credit rating initiative that would eventually provide robust credit rating on more than 500 Asian firms across 12 economies. The credit ratings could be used in commercial contracts to set collateral requirements, among other purposes. We will continue to encourage such research collaborations going forward.

Importance of Collateral Management

9   Recognising the growing significance of collateral management and potential to enhance financial stability during a crisis, there have been various efforts by industry to enhance the existing infrastructure in this area. A good example is Clearstream’s recent opening of its new Singapore branch and expanded services to bring real-time settlement throughout the Asia-Pacific business day.  This continued entrenchment of collateral management expertise in Singapore will help lower costs, widen breadth of collateral coverage, enhance cross-border settlement capabilities and ultimately increase international investors’ participation in Asian markets. The growing presence of established multi-asset class global custodians and international central securities depositories in Singapore will strengthen Singapore’s real-time settlement, delivery versus payment and asset servicing capabilities. 

10  To complement industry’s efforts, MAS has adopted a three pronged approach to further spur the growth and development of collateral management, which is a core component in developing Singapore as a risk management centre.

Cross-Border Collaboration in the Global Markets

11   On the international front, MAS contributes actively at various forums such as the Financial Stability Board (FSB), the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions (IOSCO) to help shape new regulatory standards, while keeping in mind that a balanced approach is needed.  For example, the discussions on liquidity risk management standards, capital framework for banks and standards for financial market infrastructure, which MAS will be adopting over time.

12   MAS will also collaborate with central banks internationally on cross-border collateral arrangements to accept well-rated foreign currencies and government debt securities as collateral in the Standing Facility. These international collaborations would allow the liquidity providing central bank to quickly access alternative yet reliable source of collateral when required. An example is the MOU signed last year with the De Nederlandsche Bank N.V., the Dutch Central Bank. These arrangements are conducive to overall monetary and financial stability in both countries and would strengthen liquidity provision cooperation between both central banks.

Regional Collaboration

13   On the regional front,  MAS as a member of the ASEAN Capital Market Forum (ACMF) and chair of the Working Committee on Capital Market Development, will work together with our counterparts in the region and the private sector to promote the strengthening and deepening of regional capital markets, by enhancing market linkages, market access and market liquidity.  Together we aim to build capacity and lay the infrastructure for the development of ASEAN capital markets, with a long-term goal of achieving cross-border collaboration between the various capital markets in ASEAN. 

14   This integration of regional capital markets will be undertaken through a series of strategic actions, including the mutual recognition and harmonisation of standards for cross-issuance, building infrastructure for cross-border trading and market liquidity, promoting new products and market intermediaries, and relaxing regulations that restrain the role of institutional investors.  For example, the ASEAN Finance Ministers have endorsed the formation of a set of indicators to measure the progress of ASEAN’s bond market development in terms of openness and liquidity. Using a scorecard approach, the indicators provide a set of benchmark for identifying market gaps   in the areas of market access and tax treatment, and monitoring the removal of these gaps over time.  By addressing the key gaps identified in the ASEAN bond markets, we expect to see a meaningful transformation of our regional bond markets in the years to come.  Promoting a liquid, efficient and integrated regional bond market will be a key component in ensuring ASEAN’s long-term competitiveness.

15   In terms of capacity building, we are encouraged by the establishment of trading linkages between ASEAN member exchanges. We believe that such initiative can help to strengthen the competitiveness of the regional exchanges and provide greater investor access into the ASEAN marketplace. In the area of post-trade, there have also been various efforts on improving the clearing and settlement infrastructure to increase the efficiency of our regional bond markets. This includes the task force under the Asian Bond Market Initiative (ABMI) which has been studying the feasibility of a regional settlement intermediary and looking at ways to reduce barriers to cross-border bond transactions in the region.

16   Singapore will continue to work closely with the rest of ASEAN to raise collateral management standards and to enhance the visibility of ASEAN capital markets as an attractive investment destination for global investors.

Building Competencies

17   The third and final focus is on building competencies for collateral management in Singapore.  Given the growing complexity and quantity of assets involved in today’s global financial system, the ability to ensure that cash and securities are promptly and effectively delivered between trading parties is vital to the development of a successful international financial centre. 

18   In terms of building competencies, MAS recognises that a deep pool of skilled talent is critical to the continued success of the financial sector, including the collateral management business. The Financial Industry Competency Standards (FICS) framework was developed to enhance the standards of competency and professionalism of the financial workforce. FICS provides the competency standards for more than 50 job functions within the financial industry upon which training and assessment programmes may be developed. Collateral management is a pertinent component of FICS accredited programmes in a number of functions, such as Transaction Services (including Cash Management, Securities Services and Custody), Treasury, Risk Management, and Credit Analysis/ Control.

Conclusion

19   In conclusion, collateral management will become more challenging and more important in the coming years for the Asian region.  Singapore, with its connectivity to the global community and its central location in Asia, is well positioned to be a key node for risk management where strong collateral management capability is an important component.  To achieve this, MAS will seek to broaden the breadth of collateral usage in Singapore and work together with other central banks.  We will also facilitate industry’s efforts to enhance the collateral management infrastructure in Singapore and build greater competencies in this area. Lastly, we will continue to forge greater partnership with regional counterparts and push forward on our efforts to enhance market capacity and access within ASEAN.

20   On this note, I extend my heartiest congratulations and best wishes to Clearstream for its inaugural Global Securities Financing Asian Conference.  To all the speakers and participants of the GSF Conference, I wish you a fruitful and successful conference.

21   Thank you.