Possible policy implications of such developments from a monetary and a financial stability perspective  All the factors I have just mentioned require authorities to consider – in conjunction with the financial industry – ways of preserving monetary and financial stability in this changing environment. A. A stability-oriented monetary policy is a fundamental prerequisite for the smooth functioning of financial cycles. Financial deregulation has radically changed the conduct of monetary policies. More open economies and greater interdependence between financial systems have completely overhauled the context in which monetary policy is implemented. •  Financial markets can now penalise inflationary monetary policies by withdrawing capital, with a subsequent rise in long-term interest rates and/or depreciation of the exchange rate. •  At the same time, monetary policy transmission mechanisms have become more diversified and complex. This situation has prompted the authorities to separate the different instruments for implementing economic policy. In this context, monetary policy has been clearly been assigned the objective of maintaining price stability. Today, monetary policies are conducted within a framework characterised by three features: •  Firstly, reducing inflation expectations depends on compliance with a number of rules that have been clearly defined in advance. Consequently, this policy can only be effective if the authority responsible for defining and implementing it is credible. The conjunction of a clear, overriding objective of price stability (which has been explicitly laid down in the statute of the ECB), with well-established institutional independence ensures the continuity of the monetary policy decisions made by the authorities.

Singapore is already an established centre for managing Asian investments of global clients, and global investments of Asian clients. The strong growth potential of wealth management makes it an industry where Singapore is well placed to become a global player. The large increase in the number of HNWIs globally has also boosted demand for estate and trust planning. We are reviewing and modernizing the Singapore Trustees Act. MAS is also reviewing the Trust Companies Act, and will take over the regulation of trust companies. These steps will enhance Singapore’s position as an international trust domicile and widen the suite of wealth management services available here. We also need to build a larger pool of wealth management skills, and continue to increase the range of product offerings for wealth management clients. Capital markets Since the Crisis, countries in Asia have recognized the importance of developing their bond markets. While individual countries have made significant progress, their markets remain fragmented and small by international standards. We need closer co-operation among the capital markets in Asia, in order to integrate the markets and collectively increase their depth and liquidity. This will allow us to effectively recycle some of Asia’s huge reserves and attract more international investors to the region. Regional governments have therefore taken several initiatives to foster a regional capital market, covering both fixed income and equity. These address both supply and demand side issues, such as easing constraints to cross border activity, forging alliances and linkages among the exchanges, as well as establishing a regional infrastructure.