The current outsourcing and off-shoring trend would also present opportunities for us. One estimate is that two million jobs would be created in lower-cost locations like India and China over the next 5 years. While we cannot compete with India and China on cost, we can compete for processing activities which are mission critical and of higher value-added. In the past year, major financial institutions have relocated higher-end middle and back-office operations here. These institutions take the view that Singapore’s developed infrastructure, reliability, and skilled manpower make us more suitable for these time-sensitive and mission-critical functions. In the banking sector, we have gone from 7 local banks to 3 over the last 5 years. Singapore banks have grown larger and stronger, and they are continuing to build up their regional footprints. As a regulator, MAS is happy that they have made progress strengthening management teams and building up risk management systems. Last year, one rating agency even ranked Singapore banks as being among the strongest not only in Asia but in the whole world.5 However, by international standards, the three local banking groups are still rather small, despite having made some regional acquisitions and undergone domestic consolidation. The largest of them, DBS Group, ranks only 96th in the world in terms of assets. The banks are also mainly Singapore banks, rather than regional players with strong presence in several countries. Possibilities for domestic growth are limited, other than by further consolidation.

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.