The impact of these innovations on the safety and soundness of financial institutions, and on the resilience of the financial system is not always obvious. Regulators must continually seek to identify and manage new and evolving risks, without inhibiting the creativity and dynamism of the markets. As we continued to shift from one-size-fits-all to risk-focused supervision, we modified, adapted and updated specific supervisory practices and methodologies in line with industry developments. In the last year, we have taken steps to more clearly define (1) the objectives or desired outcomes of supervision, (2) the functions MAS performs directly or facilitates indirectly to achieve these outcomes, and (3) the principles that guide our supervisory approach. This will help us to steer through the environment of continuous change and greater uncertainty. We intend to publish the framework of our ideas on these issues. In all areas of supervision, we continue to build up our institutional knowledge. This includes understanding the key risk areas of individual institutions, and how they manage risks. We keep asking this fundamental question: What could go wrong with each institution that we supervise? Then we allocate appropriate supervisory resources, depending on the probability and potential impact of different mishaps. We are also making progress implementing risk-based capital requirements. The risk-based capital requirements for SGX member companies have taken effect in October. The models for insurers have been rigorously tested and will be implemented next year. In banking, where international risk-based capital standards already exist, MAS is working with local banks to prepare for Basel II.

Deepening talent pool Third, deepening Singapore’s talent pool. As we move towards providing higher value-added services, we will face more intense competition for talent. We need to deepen our talent pool by training the local workforce whilst stepping up efforts to attract foreign talent with the requisite specialist skills. The industry needs professionals with market experience and skills to deal with the increasingly complex and volatile financial markets. To meet this demand, we need to enhance our training and development initiatives. Besides co-funding financial skills training under the Financial Sector Development Fund, we are actively promoting Singapore as a financial training hub. Discussions are now on-going with the newly established Wealth Management Institute and INSEAD as well as major institutions to develop corporate training centres and corporate universities. We would also like to build up Singapore’s financial research capabilities with an Asian and emerging market focus. We are currently exploring the possibility of establishing a financial research institute, in partnership with established financial research institutes worldwide. Enhancing market discipline To enhance market discipline, we have facilitated the establishment of industry-sponsored but independently-run complaints-handling processes and mechanisms for customers to settle disputes with banks and insurers. The banking industry now has a Consumer Mediation Unit and the insurance industry the Insurance Disputes Resolution Organisation (IDRO). Presently, we are working with the securities industry to study the feasibility of an industry-based dispute resolution scheme for the capital markets.