Tharman Shanmugaratnam
Deputy Prime Minister and
Minister-in-charge of MAS

The Singapore economy is going through an important phase of restructuring at a time when the external environment faces challenges.  Economic growth is expected to remain sub-par in many developed economies.  The tapering of asset purchases by the US Federal Reserve could lead to higher borrowing costs and falling asset prices, with potential spillover effects on the broader global economy and financial system.  Singapore has weathered the global volatility of the last few years well, but there will be new risks.

MAS monitors these risks closely as we seek to safeguard Singapore’s economic stability and financial resilience.  Monetary policy will continue to aim at stabilising inflation.  We will take into account the transitional challenge of an economy undergoing restructuring, with price pressures due to rising wages in a tight labour market while the shift to higher productivity is still underway.  MAS will also ensure that macroprudential policies remain appropriate to maintain stability in the property market and ensure financial prudence.  

The international regulatory landscape continues to see significant change.  Changes in the structure of global banks and new regulations that have cross-border implications will have implications for Singapore’s financial centre.  MAS will position Singapore in the new regulatory landscape in a way that make sense for Singapore’s financial sector, while ensuring a robust and trusted financial centre.  We will at the same time foster a financial centre that plays a growing role in Asia, and supports inclusive growth in Singapore.

Promoting economic stability

1   The external environment will support continued moderate growth of the Singapore economy, but bouts of volatility can be expected.  Growth would be capped by the tight labour market, before more significant and sustained gains in productivity are realised. 

2   Following two years of elevated inflation (mostly due to imputed rentals on owner-occupied accomodation and car prices), the rate of increase in prices moderated in 2013, closer to Singapore’s historical experience.  Although inflation is expected to rise gradually due to strong wage pressures, it is unlikely to increase to the high levels seen during 2011-2012.  MAS will continue to remain vigilant against a resurgence of cost and price pressures.

3   Continued judicious management of the exchange rate of the Singapore dollar will ensure medium term price stability, and anchor inflation expectations, while supporting the economy’s transition to productivity-led growth. 

Ensuring a robust and resilient financial sector

4   Singapore’s financial markets have remained resilient in the face of global financial volatilities.  The expected tightening of global financial conditions can lead to stresses for financial markets and institutions, shifts in investor sentiment, and volatile capital flows.  MAS will stay vigilant and guard against these risks. 

5   We will build on our earlier efforts to fortify the resilience of financial institutions in Singapore and ensure the proper functioning of our capital markets and financial market infrastructures.  Singapore has fully implemented the Basel III minimum capital requirements for the local banks, two years ahead of the international timeline prescribed.  A risk-based capital framework has been introduced for capital market services licensees, while the capital framework for insurers is being enhanced.  MAS is also reviewing the Basel III global liquidity rules for local implementation. 

6   In an environment of increasingly complex financial group structures, MAS is strengthening its oversight of financial holding companies and their financial groups.  We are also enhancing the regulatory framework for the resolution of financial institutions; this includes drawing up recovery and resolution plans for systemically important banks in Singapore.  To enhance depositor protection, MAS is requiring foreign banks important to the domestic market to locally incorporate their retail banking business.  

7   On the capital markets front, MAS has implemented a number of internationally mandated regulatory reforms in the trading of OTC derivatives.  We will also introduce a regulatory framework for the setting of financial benchmarks.  In addition, we will implement measures to strengthen the securities market in Singapore, to promote orderly trading and responsible investing.  Proposals currently considered include a minimum trading price for issuers listed in SGX Mainboard, collateral requirements for securities trading, and short position reporting requirements.

8   To better safeguard the interests of retail investors, MAS is working with the industry to improve the quality of financial advice, foster a culture of fair dealing, as well as achieve greater efficiency in the distribution of life insurance and investment products.  A web aggregator will be introduced to enhance comparability of life insurance products, while consumers will have direct access to basic insurance products without paying commissions.  MAS is also reviewing its regulation of collective investment schemes to ensure that consumers are better informed and protected where necessary from new investment schemes.  Against a backdrop of low interest rates and growing leverage, MAS has also introduced a series of measures to encourage financial prudence among borrowers.  MAS will step up efforts to raise the financial literacy of Singaporeans and empower investors to make informed decisions.

9   To remain a valued partner on the international economic and financial front, MAS will continue to participate actively in organisations such as the International Monetary Fund, the Financial Stability Board, as well as policy committees under the Bank for International Settlements, the International Association of Insurance Supervisors and the International Organisation of Securities Commissions.

Safeguarding the integrity of Singapore’s financial centre

10   Singapore is fully committed to international efforts to combat money laundering and tax evasion, and has taken a series of measures to ensure that we remain a clean and trusted financial centre.  Laundering proceeds from tax evasion and tax fraud is now a crime in Singapore.  MAS has stepped up to meet enhanced global standards on information exchange and has intensified its supervision of financial institutions to keep illicit money out of our financial centre. 

Fostering a purposeful financial centre

11   Singapore has built a diverse financial ecosystem, strong in foreign exchange, capital markets, reinsurance, and wealth management.  In the coming years, MAS will build on these strengths and promote new capabilities and initiatives, such as fostering greater use of technology and innovation in financial services, developing an offshore RMB hub, as well as enhancing trade, infrastructure and SME financing.  In addition, MAS will continue efforts to enhance the capabilities of our financial sector workforce and develop a strong core of Singaporean financial specialists and leaders.