We wanted to build on our strengths as a money market and treasury centre to become the debt hub for Asia. At the same time, in other respects we hoped to emulate Zurich. We could become the premier international asset management centre for Asia. After all, our well-respected regulatory, legal and accounting systems and stable socio-economic conditions had already made Singapore a location of choice for private wealth. After five years of promotion and development, we have achieved some encouraging results. The debt market has grown more than 3-fold since 1998. We have attracted some foreign issuers, and our own corporates have tapped international markets from here. However, we remain largely a market with domestic focus. We therefore need to do more to make our markets deeper, more liquid and internationally established. The prospects are good. Asian countries are now cooperating more closely to develop domestic bond markets. As corporates in our region expand their businesses to take advantage of the recovery, they will need more funding. We also see a clear trend towards more derivative products being structured here as investors look for better yields or protection. All these factors will help us to continue to grow our debt markets in size and sophistication as a major debt hub. In the equity market, the global trend five years ago seemed to be towards cross-border alliances and linkages. This has generally not worked out, except to a limited extent in Europe. Indeed, the last few years have been very difficult for stock markets world-wide.

I’ll discuss how the development of new risks associated with climate change is beginning to change the practice of risk management at financial institutions in terms of governance, risk identification and management, scenario analysis and transparency. I’ll also say a few words on why I believe it is appropriate, even critical, for supervisors to focus on this particular risk. Before proceeding, I will emphasize that I am speaking for myself and my views do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Climate Change and Risk Management The discussion of climate change and risk management has introduced a new lexicon for risk discussions. Physical risk is the potential for losses as climate-related changes disrupt business operations, destroy capital and interrupt economic activity. Transition risk is the potential for loss resulting from a shift toward a lower-carbon economy as policy, consumer sentiment and technological innovations impact the value of certain assets and liabilities. These effects will be felt across business sectors and asset classes, on strategies and operations, and through the balance sheets and income statements of financial firms. At a practical level, risk managers at financial institutions need to develop the appropriate tools to identify, monitor and manage these risks. From one perspective, climate-related risks may manifest as realizations of familiar risks such as credit, market, operational, legal and reputational risk. The tools risk managers use, however, will need to change to reflect new data, changing relationships, and evolving interconnections.