Put another way, similar activities that involve identical risk issues should be regulated on an equal basis to avoid tilting the playing field. Failure to do so will result in regulatory arbitrage and cause activities to migrate towards looser controls. In Singapore, the regulators for banking, securities and insurance activities are consolidated in MAS. Specific to the capital market, we have integrated our legislation for the securities and futures industries, and harmonised our regulation of the financial advisory business to support the cross-selling of products. What is critical however, is not how regulatory responsibility is divided or consolidated into one or more agencies. The overriding objective is equitable treatment and consistency in the approach to the measurement and management of risk. Capital requirements illustrate this most clearly. Most regulatory models have moved away from setting fixed minimum capital for regulated activities. In banks as for capital market intermediaries, regulators are adopting and refining the risk based regulatory approach. Where risks take on a similar profile therefore, the capital charges should be aligned based on a consistent principle. This is so even as the risk management regime in the banking, securities and insurance sectors retains some distinctive features that recognises the differences in these businesses. Legislative initiatives in Singapore In Singapore, at the heart of the regulatory framework for the capital markets is the Securities and Futures Act (“SFA”) which was enacted in September last year. The SFA is an omnibus Act that sets out the regulatory framework for the capital market.

These include the Basle Committee’s work on a set of globally accepted principles of risk-based capital among banks; the Group of 30’s work in the area of standardising OTC documentation; and a collaborative effort by the Bank for International Settlements and IOSCO on recommended standards for securities settlement systems. Indirectly giving impetus to international best practices is the IMF and World Bank’s Financial Sector Assessment Programme (“FSAP”). Under this initiative, assessors will collaborate with regulators in participating jurisdictions to benchmark financial systems and practices against global standards. MAS is convinced that these efforts represent considerable value-add to the global regulatory environment and has participated in support of these initiatives. We will be undertaking an FSAP this year. As an international financial center, we are also committed to contributing to international financial stability as a member of the Financial Stability Forum, and have found our involvement in various of its working groups to be invaluable. The establishment of international standards and best practices as the way forward will become even more compelling as globalisation continues, and regulators should be prepared to stay engaged with the process. In doing so, it should be recognised that initiatives to draw up international standards in themselves also add value by prompting regulators to re-examine existing regulation and review the policy rationale behind them. This is useful in bringing dated practices back into line with international best practices. Improvements to comply with globally accepted principles will benefit the market’s growth and in the long term attract participants with strong internal controls.