Banks also need to prepare themselves for new business opportunities, especially e-banking. MAS will track the progress of the banking liberalisation programme. We will review the status next year, and decide on further steps to open up the sector. Local banks will come under increasing pressure, not from MAS, but from the rapid changes in technology and the market. The banks will have to continually reassess their competitive positions and strategies, and adapt themselves as conditions change. MAS will continue discussing with the local banks ways to increase bank transparency further, for example by disclosing more information on remuneration and incentive structures, related party transactions, the banks’ risk profiles and their risk management processes. Greater disclosure will reinforce corporate governance. Singapore banks are ahead of most of their Asian counterparts in these two areas, but they are still some way from the best international practices. We are reviewing the current Minimum Liquid Assets and Minimum Cash Balance requirements imposed on banks, and the capital requirements for financial holding companies and banking groups. This is part of the shift from regulation to supervision, replacing “one-size-fits-all” requirements with a more “tailored” approach. We should not unnecessarily disadvantage Singapore banks vis-à-vis foreign competitors. We are reviewing bank involvement in non-financial activities, and the cross-holding structures typical of Singapore banking groups. An appropriate separation between financial and non-financial activities is important to minimise the risk of contagion and ensure that management is focussed on the core business of banking.

Capital markets In addition to sound and forward-looking financial institutions, it is important that we develop broad and deep capital markets. These are two complementary pillars of a vibrant and dynamic financial hub. Our domestic markets alone will not sustain the depth, breadth and resilience needed by liquid capital markets. It is thus critical for us to develop the equity and debt markets to help service Asian needs, and be linked up with global markets. Foreign companies must find distinct advantages to list on SGX, or to issue bonds in Singapore. They want to raise capital at the lowest cost, and find liquidity and support for their securities in the secondary market. This requires adequate interest from local and foreign investors for securities issued in Singapore. We must thus offer investors easy access to trading securities and derivatives in Singapore, as a key Asian leg in their global cycle. Equities In the equities market, although SGX was the first exchange in Asia to merge and demutualise, in other areas, other countries are ahead. For example, we have been slow to develop online trading. To get more shares traded online, SGX will build up IT capacity and systems at the exchange and the brokerages, and ensure that prudential safeguards are in place. SGX is also considering faster liberalisation of commissions for on-line trading, so that it need no longer regulate what brokers charge and whether they give customers discounts. SGX must attract more foreign companies to list and trade actively in Singapore. This will not be easy.