MAS will follow up by allowing $ OTC interest rate derivatives, such as interest rate swaps, forward rate agreements, interest rate options and swaptions, to be transacted freely without consultation. Banks will, however, be required to submit monthly reports on details of interest rate derivative transactions exceeding $ million with counterparties outside Singapore. Credit rating of foreign entities issuing $ bonds So far, we have required foreign entities which wish to issue $ bonds to be of good credit standing. Up till now the lowest credit rating of foreign entities that have tapped the $ bond market has been single A. Debt intermediaries have told us that investors in the $ market would like to see a wider credit spectrum of $ bonds. MAS recognises that allowing more diversely rated bond issues would increase investment opportunities for investors with different risk-return appetites, allow portfolio diversification, and create more investor interest in our debt market. To widen the credit spectrum of foreign entities tapping the Singapore dollar bond market, MAS will allow the following to issue Singapore dollar denominated bonds: a) all rated foreign corporates; b) all sovereigns, rated or unrated; and c) unrated foreign corporates, provided the investor base is restricted to sophisticated investors.1 However, the requirement for the non-resident issuers to convert or swap the $ proceeds into foreign currency for use outside Singapore remains. MAS still does not allow $ funding of non-residents where the proceeds are to be used outside Singapore, or for purposes which do not generate economic value to Singapore.

Nowhere is this more obvious than in the OTC derivatives market, where banks are trying to compress hundreds and thousands of lines (and over USD 700 trillion of notional value 7) of OTC derivative transactions, so as to consolidate liquid collateral for margin efficiency. Second, as jurisdictions roll out clearing and trading mandates for OTC derivatives, more transactions will be traded and cleared on regional and global platforms to reap the benefits of scale and liquidity. This will be instrumental in transforming complex webs of gross exposures into smaller sets of net exposures, reducing systemic risk and strengthening the derivatives  4  “Asset Management 2020: A Brave New World,” PwC, 2014. 5  Market capitalisation as of 31 March 2014, Relbanks. 6  “Myanmar’s Banking Sector Liberalisation: A Win-win for All,” PwC, 2014. http://pwc.blogs.com/growth_markets/2014/10/myanmars-banking-sector-liberalisation-a-win-win-for-all.html  7  BIS derivatives statistics, September 2014. http://www.bis.org/statistics/dt1920a.pdf  2  BIS central bankers’ speeches  market. These pressures will naturally drive more aggregation across geographies and asset classes, and place the issue of market integration squarely on the agenda. Global reforms, if they are implemented consistently, can also support financial integration by making it less burdensome for financial institutions to comply with regulations in different jurisdictions and for regulators to mutually recognise and defer to each other where appropriate. III. Market integration is happening at two levels: among jurisdictions and among participants  11. Over the last three years, market integration has been taking place in Asian financial markets.