Regulators used to worry about institutions that were “too big to fail”; now, they worry about institutions that are “too connected to fail”. Size matters ; but connectivity matters more. 21. This high degree of interdependence means that governments in major economies can no longer act in isolation. Regulatory policies must be globally consistent to minimise the risk of arbitrage. Supervisory actions must be internationally coordinated to maximise their effectiveness. 22. Yet, regulation and supervision is essentially a national prerogative, that must cater to the domestic context and circumstances to be effective. Recognising this tension, international policymakers have focused on reaching consensus on international standards that serve as a minimum benchmark, while allowing countries the freedom to choose appropriate regulatory tools to fit individual circumstances. A uniform, one-size-fits-all international regulatory regime will not work. 23. The most striking application of this principle is in the approach being taken for the regulation of global systemically important financial institutions, or G-SIFIs. These institutions, because of their size, complexity, cross-border nature, and interconnectedness, would cause significant disruption to the global financial system and economic activity, if they failed in a disorderly manner. There is thus a need for global supervisory cooperation, in order to identify the key points of failure within such institutions. The Financial Stability Board, together with other international standard setting bodies, is rethinking its approach towards the monitoring, sharing, and mitigation of systemic risks posed by G-SIFIs. BIS central bankers’ speeches  3  24.

It includes a suite of tools ranging from prudential instruments like loan-tovalue ratios and fiscal measures like stamp duties on property transactions, to supply-side and other administrative measures. Singapore does not target asset prices but keeps a close watch on asset price movements, looking for signs of speculative froth, excessive leverage, or concentration risks. 19. Systemic stability is also a shared responsibility. It requires coordinated efforts across different government regulators and agencies. MAS is fortunate in this regard. As an integrated regulator which supervises the banking and insurance industries, as well as the capital markets, MAS is well placed to take a comprehensive view of risks within the financial system as a whole. As a central bank responsible for macroeconomic stability, MAS is also able to monitor and understand the effects of monetary and liquidity conditions on systemic risks. And MAS works closely with other government entities on issues such as system-wide safety nets – such as the deposit guarantees of 2009 and 2010 – taking a comprehensive whole-of-government approach. Reconciling international standards and domestic discretion 20. The third dimension of rebalancing in regulatory reforms is that between international standards and domestic discretion. We have known for some time that we live in a globalised, interconnected world. But we did not know the extent of our interconnectedness until the crisis hit home. Cross-border bank lending is more than 40 per cent of world GDP. Global finance is really a vast and complex network of connections. Financial shocks are transmitted through this network with speed and virulence.