Tharman Shanmugaratnam
Deputy Prime Minister and
Chairman, MAS

11 October 2011

The global economic environment has become more uncertain.  There is a general lack of confidence that the major advanced countries have the will to address the structural problems that underpin their weak economic growth and unsustainable fiscal positions.  In this environment of heightened risk and volatility, MAS will continue to provide the basis for economic and financial stability in Singapore.

Promoting economic stability

1   The headwinds from slower global growth will mean slower growth in Singapore in the next few years.

2   Headline inflation has been rising in recent months, although the core inflation rate which better reflects increases in costs of living for most Singaporeans has risen more slowly.  Core inflation, excluding the imputed costs of existing owner-occupied homes and costs of private transport, has been lower at 2-3%.  Both headline inflation and core inflation are expected to moderate towards the end of the year.  But we must remain vigilant against a resurgence of cost pressures.

3   A stable Singapore dollar is an anchor of stability for our small, open economy.  Continued judicious management of the effective exchange rate of the Singapore dollar against a trade-weighted basket of currencies will help dampen inflationary pressures while supporting economic growth in an uncertain and volatile external environment. 

Strengthening financial sector resilience

4   Financial markets globally have remained fragile since the crisis of 2008, amplifying the effects of both financial and non-financial shocks.  The dynamics of contagion can affect all markets.  MAS will stay vigilant against emerging risks, and enhance surveillance of the financial system.  We will conduct regular stress tests on our financial sector, and work with MOF and other agencies to secure overall financial stability. 

5   We will continue to strengthen the resilience of financial institutions in Singapore, including banks and insurance companies, and ensure the proper functioning of our capital markets and financial market infrastructures.  Banks will be required to maintain prudent capital buffers, in line with, and in addition to Basel III minimum requirements.  The risk-based capital framework for insurance companies will be enhanced. 

6   New liquidity standards will be introduced and we will evaluate how best to strengthen our bank resolution regime. We will implement G20/FSB mandated regulatory reforms in the trading of OTC derivatives. 

7   For retail investors, safeguards in the sale of investment products will be strengthened.  We will also step up financial education efforts to empower investors to make informed decisions.

8   We need stronger policy coordination and cooperation among countries to address global challenges to economic and financial stability.  We will continue to participate actively in international organisations such as the International Monetary Fund, and international policy-making forums such as the G20, Financial Stability Board (FSB) and policy committees under the Bank for International Settlements (BIS).  Singapore’s engagement and repute internationally will serve us well in times of uncertainty and stress.

Fostering a competitive financial centre

9   The economic centre of gravity continues to shift towards the East.  The rise of Asian conglomerates will increase the demand for financing, treasury, and risk management services.  The region’s infrastructure demands will drive capital market funding needs.  Wealth accumulation in emerging Asia will create demand for investment management.

10   Singapore is well placed to shape and contribute to these shifts, and grow as one of the leading financial centres in the region.  The financial industry will remain a key growth engine for the Singapore economy, creating good jobs and meaningful careers.  As global financial institutions seek to expand and hire in Asia, we will continue to deepen our talent pool and build strong and distinctive capabilities in finance.