We are not going to prescribe the approaches for our banks to adopt, but we have encouraged them to put in place the more advanced risk management practices that would enable them to move to the internal ratings-based approaches if they chose to do so. To enhance risk management capabilities in institutions, we have also issued comprehensive guidelines on international best practices. We have recently completed the IMF/World Bank’s Financial Sector Assessment Program (FSAP). According to the preliminary findings, the assessors have concluded that Singapore’s financial sector is robust with few short-term vulnerabilities. While we can take heart from the positive FSAP findings, we must not be complacent. We must remain vigilant to ensure continued confidence in our financial system. Strengthening partnership with industry Second, strengthening partnership with the industry. MAS has collaborated with the industry in several areas. We have embarked on a joint initiative with SGX to cultivate a stronger research-oriented environment in the stock-broking industry. We have also partnered banks to establish a cheque truncation system, and to include the Singapore Dollar as one of 11 global currencies in CLS (Continuous Linked Settlement). The participation in CLS eliminates FX settlement risk, and further consolidates Singapore’s position as a leading FX trading centre and a key node in the global financial system. Last year we formally adopted a policy of extensively consulting industry on new regulatory changes. Since January 2003, we have issued 17 consultation papers. The feedback from industry both here and abroad, has been useful in helping us formulate these changes.

Second, we will work to take full advantage of the new FTAs currently being negotiated to create greater financial flows into Singapore, and to enable our financial institutions to access these markets. In our Comprehensive Economic Cooperation Agreement (CECA) with India, we are exploring closer integration of our financial markets. Both countries stand to benefit if our financial sector players can operate seamlessly between the two markets. While there are many regulatory and other issues to be addressed, we see this as a unique opportunity for both India and Singapore. Empowering consumers to achieve fair dealing Third, we must empower consumers to achieve fair dealing. This will help us to develop a more informed and savvy consumer market, which is necessary to grow a vibrant financial sector. With liberalisation, there are now more channels for savings that entice investors with higher yields, such as bonds, equities, unit trusts, hedge funds, and insurance and annuity products. These products also carry higher risk. Has consumer sophistication risen in line with the complexity of financial products? As consumers seize new investment opportunities, how far should MAS safeguard their interests? MAS no longer practises merit-based regulation of products. It is neither feasible nor desirable for MAS to prescribe what consumers can or cannot invest in, how these products should be priced, or what terms and conditions should govern transactions. This would inhibit business enterprise, restrict consumer choice, and raise compliance costs. MAS cannot intervene in commercial disputes with individual institutions or arbitrate on contractual matters.