However, this year things seem to have turned. In Singapore, stock market activity reached record levels in recent months. Activity should stay strong, because of portfolio inflows in anticipation of the economic pickup next year. The increase in interest in the SGX and in listings on the exchange, from companies having substantial operations in China has been encouraging. There is also a new interest among regional exchanges to explore alliances with each other. We have maintained our position as a leading global FX centre, and this has opened up opportunities that were less apparent in 1998. One area is commodities trading. Financial institutions are now also major commodities players, with more financial products being structured based on commodity prices as the underlying risk. These structuring and trading teams are usually in the same business units as the FX experts, a number of whom are based in Singapore. In investment banking, for some time all the interest seemed concentrated in North East Asia. South Korea had recovered from the Asian financial crisis faster than the rest, and China was creating great excitement. However, strong investor interest in recent deals in Southeast Asia indicates a revival of regional M&A activity. Many Singapore firms have interest in expanding overseas, possibly through an acquisition strategy. With the economic recovery firms are likely to increase their capital expenditure, while countries will invest more in infrastructure and other big-ticket projects. This should foster further pickup in the syndicated loan market and Asian Dollar Market.

We are not going to prescribe the approaches for our banks to adopt, but we have encouraged them to put in place the more advanced risk management practices that would enable them to move to the internal ratings-based approaches if they chose to do so. To enhance risk management capabilities in institutions, we have also issued comprehensive guidelines on international best practices. We have recently completed the IMF/World Bank’s Financial Sector Assessment Program (FSAP). According to the preliminary findings, the assessors have concluded that Singapore’s financial sector is robust with few short-term vulnerabilities. While we can take heart from the positive FSAP findings, we must not be complacent. We must remain vigilant to ensure continued confidence in our financial system. Strengthening partnership with industry Second, strengthening partnership with the industry. MAS has collaborated with the industry in several areas. We have embarked on a joint initiative with SGX to cultivate a stronger research-oriented environment in the stock-broking industry. We have also partnered banks to establish a cheque truncation system, and to include the Singapore Dollar as one of 11 global currencies in CLS (Continuous Linked Settlement). The participation in CLS eliminates FX settlement risk, and further consolidates Singapore’s position as a leading FX trading centre and a key node in the global financial system. Last year we formally adopted a policy of extensively consulting industry on new regulatory changes. Since January 2003, we have issued 17 consultation papers. The feedback from industry both here and abroad, has been useful in helping us formulate these changes.