The increase in capital reflects a number of factors – a long period of low capital payouts relative to income, significant equity raises, as well as sizable asset dispositions that have shrunk the balance sheet and bolstered capital. The fact that credit losses have abated and this has enabled banks to release reserves has also been important. The second element is the international agreement to implement new Basel III capital standards. Not only will Basel III significantly raise the Tier I capital standard when it is fully implemented in 2019, but also it raises the quality of capital by putting the emphasis on tangible common equity. In addition, we and our partners in the international community are in the process of implementing capital surcharges for large, systemically important financial institutions (SIFIs),  BIS central bankers’ speeches  5  with the size of the surcharge dependent on size, complexity, and interconnectiveness. I appreciate that it is impossible to calibrate “SIFIness” precisely, but this is not a valid argument for no surcharge. The logic behind the SIFI surcharge is that the failure of a systemically important institution would generate a very large shock to the rest of the financial system. As a consequence, it makes sense to require higher capital for such firms to reduce their probability of failure. In addition, the Federal Reserve’s efforts to improve banks’ capital planning processes and evaluate their capital dispositions in the context of stress scenarios – the so-called Comprehensive Capital Assessment and Review (CCAR) process – is an important innovation.

Broad strategies for effective provision of wealth management In recognition of the need to further enhance the regulatory framework supporting the development of the financial advisory sector, the Bank has recommended for further streamlining of the current dual licensing regime for FAs and financial planners (FPs) in the Financial Sector Blueprint 2011–2020. A Joint Working Group with the Securities Commission has been formed to assess the existing legislations and regulatory regime across both jurisdictions, with the aim of further reducing duplications and related costs of compliance for the benefit of industry participants. Some of the measures that have already been introduced include the harmonization of limits on foreign shareholding and streamlining of professional qualifications and requirements on continuing professional development. The Bank will be engaging with the AFA at a later stage as part of the consultative process towards further enhancing the regulatory regime for FAs and FPs. In line with our objective of promoting fair and responsible conduct by financial service providers, the Bank has recently reissued the Guidelines on Proper Advice Practices for Life Insurance and Family Takaful Business. The Guidelines which was previously applicable to the sales force and agents of insurers and takaful operators has now been extended to include all insurance and takaful intermediaries, including financial advisers. The Guidelines outline the minimum standards for proper advice and ethical selling practices of life insurance and family takaful products by insurance and takaful intermediaries, with the aim of ensuring consumers are provided with suitable advice to support informed decision-making.