http://www.imas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statem... 21-07-18  Connecting Global Markets Supporting Asias Growth  •  Page 6 of 7  Some examples: • UOB’s euro-denominated covered bond in 2016 was the first of its kind in Asia. • Chongqing Western Modern Logistics raised $ million out of Singapore in 2016 to fund infrastructure development in China. There are two grant schemes that make Singapore’s bond market even more compelling for issuers. •  The Asian Bond Grant Scheme defrays the issuance cost for first-time Asian issuers looking to raise international capital from Singapore. •  We have received strong interest in the scheme. Some examples: • China Sinochem International raised $ in senior unsecured bonds. • PT Paiton Energy, Indonesia’s second largest independent power producer, raised $ for its project bond. •  The Green Bond Grant Scheme defrays the additional costs of obtaining an external review for green bonds. • Foreign green bond issuers include Indian Renewable Energy Development Agency as well as Canadian insurer Manulife. Infrastructure financing is another avenue for investors looking to opportunities in Asia. And Singapore, as a full service Asian infrastructure financing hub, is a good place to look for such opportunities. •  Singapore has strong connectivity to the region and has deep capabilities in project development, urban solutions, and financial and professional services. We have set up Infrastructure Asia: a go-to knowledge centre for infrastructure players and investors in Asian infrastructure. •  The office will facilitate infrastructure investment and financing, availing investors to infrastructure investment opportunities.

For example, doubling leverage from 10 to 20 generates a new, steeper payoff profile of returns (Figure 2). These are then even more asymmetric. Leverage allows shareholders to profit more significantly when the market turns up, while still avoiding the downside when it turns down. From Merton, this strategy enhances shareholder value. Looking over a sweep of history, there is evidence of banks pursuing just this leverage strategy. Chart 3 plots the distribution of UK banks’ leverage since 1880. As unlimited liability was phased out, leverage rose from around 3–4 in the middle of the 19th century to around 5–6 at its close. As extended liability was removed, leverage continued its upward trend into the 20th century, by its close reaching over 20. Seven years into the 21st century, at its highwater mark, leverage hit 30 or more. This leverage strategy can be seen even more vividly in the distribution of returns to bank equity over the past century. As Chart 4 illustrates, having begun the 20th century in modest single figures, equity returns were averaging close to 20% by its end. At the height of the boom, equity returns touched 30%. Arithmetically, virtually all of this increase in equity returns can be explained by increased leverage. And it has come at an obvious cost – greater risk. That, too, is clear from the empirical distributions. Over the past century, the variability of returns on bank equity has risen between six and sevenfold. The lower tail of equity returns has also been fattening.