Foreign banks have continued to expand their operations here, and many have made Singapore a regional or even global platform for important banking services. The local banks have strengthened their capabilities and expanded their range of business activities. They have built up their management teams, and made significant infrastructural investments to enhance their operational effectiveness. Fees and commissions have risen as a proportion of operating income. Banks are offering new business services, while continuing to provide affordable banking facilities to the average Singaporean. They have held their own despite the increased competition. For instance, their market share of resident non-bank deposits (both ACU and DBU) has declined only marginally from 62% to 59% over the last five years. The local banks have also improved their business and risk management capabilities. The recent change in MAS’ capital adequacy requirements is in recognition of local banks’ efforts to upgrade their risk management capabilities, and should allow them to manage their capital more flexibly. With greater financial strength from the mergers and increased competition at home, local banks have begun to venture abroad and develop a regional footprint through overseas acquisitions. Banking liberalisation When MAS embarked on the liberalisation measures, we sought to anticipate changes and trends that we were convinced were already underway. Events since then showed that we moved none too soon. Technological advances have continued unabated. The Internet for instance has proven to be an efficient and widely used alternative distribution and marketing channel, and has helped create new business models.

New entrant banks can do a bit, but the big incumbent banks need to be healthy too. Their repair is now underway. That has required, and will continue to require, realism about asset values, expected losses and risks – not pretending, taking the medicine. In that sense, it is a policy in the spirit of Hayek.10 So the overall policy package has combined Keynes and Hayek. Conclusion In the wake of such a massive crisis, recovery has needed active monetary, liquidity and banking policy. Beyond the realm of central banking, it needs supply-side reform – to create optimism about higher incomes and better investment opportunities in the future. 8  See the Minutes from the Monetary Policy Committee’s meeting on 7–8 November 2012: “At the present time, it was possible that elevated uncertainty and a desire to reduce leverage meant that real activity was less responsive to lower borrowing costs than normal. But this situation could easily reverse, and with it the traction that lower yields could have in stimulating demand and output.”  9  See Broadbent (2012), “Productivity and the allocation of capital”, pages 30–33 of the Monetary Policy Committee’s November 2012 Inflation Report: and Tucker (2013), Annual Report to the Treasury Select Committee. 10  There is echo of this in Bean (2013), “Global aspects of unconventional monetary policy”. 4  BIS central bankers’ speeches  If recovery does gain traction, the MPC will need to avoid misperceptions about the likely course of policy.