Published Date: 19 January 2016

Prime Minister's Office (Monetary Authority of Singapore) Addendum to the President’s Address

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

MAS will provide an effective anchor for economic and financial stability during a period of global and regional uncertainties.

We will also actively promote innovations in finance. Technology will challenge many existing players, but is a major opportunity for our financial centre. We will work with the industry to use technology to increase efficiency and lower costs of payments, enable financial institutions to expand their reach abroad as well as better manage risks, and provide benefit to customers including ordinary savers.

Our core MAS policies should not change fundamentally. Our monetary policy decisions recognise that inflation is low today, but is likely to rise over the medium term amidst a tight labour market. They aim to secure price stability during a period of transition when cost pressures are still significant, while as the economy moves gradually towards productivity-led growth. Financial sector supervision, the other major prong of MAS policies, will remain focused on pre-empting systemic risks to the financial system, promoting the safety and soundness of our financial institutions, and ensuring well-functioning financial markets.

MAS will also work with the industry to deepen our capital markets and the foreign exchange and derivatives markets; strengthen the asset management and insurance industries; and build a vibrant RMB ecosystem. We will regulate unconventional collective investment schemes to ensure consumers’ interests are adequately safeguarded, while there will be wider bond and equity investment choices for retail investors.

Promoting economic stability

The Singapore economy is experiencing modest growth, against the backdrop of uneven global economic health and ongoing restructuring of the domestic economy. The divergence in monetary policies in the advanced economies, volatile capital flows and financial vulnerabilities in some emerging economies also pose new risks for the global system.

MAS’ monetary policy of a gradual appreciation of the nominal effective exchange rate of the Singapore Dollar since 2010 has brought inflationary pressures under control. In 2015, MAS eased monetary policy in a calibrated manner, in line with the softening of inflation and growth. MAS will continue to focus monetary policy on minimising overall economic volatility, while ensuring price stability in the coming years.

Ensuring a robust and resilient financial sector

Since the global financial crisis, MAS has strengthened the regulatory framework for banks and insurance companies. Capital and liquidity standards have been enhanced. Last year, MAS introduced a framework to strengthen the ability of domestic systemically-important banks to withstand shocks. MAS is reviewing the capital framework for insurance companies, to make it more risk-sensitive. We are also collaborating with the industry and other public agencies to strengthen the cyber resilience of the financial sector.

To strengthen Singapore’s securities markets, MAS and SGX have been working to implement reforms such as a minimum trading price for shares, short position reporting, and collateralised trading. To make OTC derivatives markets safer, MAS will implement central clearing and reporting of trades as appropriate.

The financial sector is a critical gatekeeper in the fight against money laundering and terrorist financing. MAS has kept our rules in line with international standards, and will continue to ensure that financial institutions have strong safeguards against illicit funds.

In recent years, we have stepped up efforts to empower Singaporeans to better manage their finances and safeguard their interests. MAS has expanded the suite of savings and investment options for retail investors by: (i) improving the availability of corporate bonds for stable, long-term returns; (ii) enhancing access to exchange-traded funds for diversified equity returns; and (iii) introducing the Singapore Savings Bonds for flexible risk-free returns. MAS will also regulate precious metals buy-back arrangements and collectively-managed investment schemes, to better safeguard consumers’ interests when investing in such products. We are also reviewing the use of a complexity-risk ratings framework for investment products, to facilitate sound financial decision making.

Fostering a dynamic financial centre: Innovation and jobs

We are building a vibrant financial innovation ecosystem in Singapore. We will actively collaborate with the industry to make swift, simple and secure digital payments available to all individuals and businesses, encourage financial institutions to set up innovation laboratories in Singapore to test-bed solutions, and provide a conducive regulatory environment for such innovation. MAS has also committed $225 million over the next five years to support initiatives under the Financial Sector Technology and Innovation scheme.

Technology will open up new opportunities, and change the nature of jobs in finance. Financial institutions will also face challenge from new players who are out to disintermediate them. MAS will work actively with the industry to maximise the potential of technology, and will make full use of SkillsFuture to deepen skills, at all levels of the financial sector workforce. We will also ensure a strong Singapore core in the financial sector. We will work closely with financial institutions to provide Singaporeans with more opportunities to gain cross-functional and overseas exposure, and to develop leaders with capabilities to take on responsibilities in Asia and beyond.