But it will strive to supervise institutions without placing unnecessary regulatory burdens on well-managed individual institutions or inhibiting the innovation and dynamism of the financial sector. Compliance costs of supervisory actions will be commensurate with the risks posed by the individual institutions. We will seek consistency in applying equivalent prudential and market conduct standards to financial institutions conducting similar business activities that are subject to the same risks. Harmonising and integrating regulations and supervisory practices across financial activities will reduce opportunities for regulatory arbitrage. Working towards more win-win outcomes for Singapore and the region Second, we must work towards more win-win outcomes for Singapore and the region. The growth and development of Singapore depends on the health of the world economy, and the wellbeing of our neighbours and trading partners. As a hub and gateway in this region, Singapore benefits if the region is competitive and attractive to investors and new businesses. Southeast Asia must work together to make itself more attractive, especially with new opportunities and competition arising in North East Asia. Last month, ASEAN leaders agreed in Bali to build an ASEAN Economic Community by 2020 - a single market and production base with free flow of goods, services, investments, capital and skilled labour. Asian countries need to foster closer cooperation and integration between financial systems and markets in the region. This will facilitate the financing, and payment and settlement of intra-regional trade.

The federal funds rate would likely remain unchanged for another year or two, based on the information available today, and the winding down of the bond-buying program will come eventually. Monetary authorities in other advanced economies have also employed policy tools with similar features albeit with some variations in the timing, scope, and size. This configuration of monetary policies in major countries has created a challenging environment for small open economies to conduct policy. In the post-crisis period, the relative fundamental strength of emerging market economies was already drawing in substantial capital inflows. The additional push from this extraordinary stimulus, and the  BIS central bankers’ speeches  1  reach-for-yield behavior associated with it, has compounded the pressure. Many emerging market central banks have found themselves at critical junctures where broad reappraisals of their monetary and capital account policy frameworks were necessary. Take Thailand as an example. Since the beginning of the episode, we have adopted a multi-dimensional response to the spillovers. Currency appreciation was the main cushion against rising inflows. At times when exchange rate volatility became excessive in our view, we undertook some foreign exchange intervention. But we were mindful of intervention costs and its limited effectiveness. We also further deregulated controls on outflows. This was part and parcel of our longer-term plan to encourage outward investment by Thais. At the same time, we raised the policy interest rate in response to expanding domestic demand, rising price pressures, and strong credit growth.