Once growth resumes, the wealth that is generated has to be properly deployed. In this regard, global financial institutions, whose commitment and capacity are being tested by this crisis, need to take a medium-term view of their businesses in this region. Singapore’s response and commitment Let me now briefly say a few words on Singapore’s responses. Like everywhere else, Singapore has experienced tightening credit conditions. We have taken action to address both the inter-bank money markets, as well as the flow of credit from banks to corporations. In the inter-bank money markets, MAS remains focused on ensuring that both the Singapore Dollar and the US Dollar markets continue to function smoothly. For the Singapore Dollar market, we have and will continue to ensure sufficient liquidity, through our monetary operations and standing facility. For the US Dollar market, we established a $ billion swap line with the US Federal Reserve. This line is alongside other swap lines that the Fed has with 13 other central banks, including several in Europe and Asia. As a major funding centre, we took precautionary measures to ensure that global financial institutions operating here continue to have access to US dollar liquidity. The Federal Reserve on its part recognised the importance of providing US dollar liquidity to financial institutions through central banks in sound, well managed and systemically important financial centres, so as to improve global US dollar liquidity conditions as necessary. We have not had to use the swap line, nor do we see any impending need.

To minimise uncertainty, some degree of coordination to remove these guarantee would be necessary. As governments in the developed economies inject huge sums of public funds to shore up banks, the instinct is to place demands on these banks to lend domestically. This may seem sensible individually. But collectively, this 'abandon-thy-neighbour' policy can trigger a big reduction of credit, and undermine economic recovery that eventually hurts the developed economies. Protectionist measures hurt emerging economies most, and they can trigger a backlash that sets the world back. We must resist such regression. Asia’s responses Let me now turn to the impact of the crisis on Asia, and responses to that. Asian economies will slow considerably. Those that are more highly dependent on external demand will contract more sharply than the rest. But unlike during the Asian Financial Crisis, the fundamentals in Asian financial systems and economies are generally sound. Banks are well-capitalised and have limited direct exposures to toxic assets. Corporate and household balance sheets are stronger. Current account positions are healthier and external liabilities manageable. The policy responses in several countries have been decisive and robust. Central banks in the region have appropriately eased monetary policy, and governments have put in place a range of fiscal and other measures to support lending and to cushion the impact of the global crisis. Nevertheless, considerable risks remain for Asian economies. The extent of demand contraction for Asia depends on how long and deep the recession is in the US and Europe. That remains an unknown.