There was a wave of mergers and acquisitions, as institutions sought to diversify risks, reduce costs, and exploit synergies. Financial centres faced similar pressures. As technology eroded time-zone advantages, institutions consolidated their activities within fewer financial centres. We believed that consolidation was imminent in our time zone. If there were to be only a few financial centres left in Asia, we wanted to make sure that Singapore was one of them. So we launched a fundamental rethink of our approach to supervising and developing the financial sector. Creating a more conducive regulatory environment Our new approach could be broadly summarised in four main thrusts. First, we sought to create a more conducive regulatory environment to foster dynamism and innovation, while maintaining the safety and soundness of our financial sector. MAS shifted its emphasis from regulation to risk-focused supervision, so that we could deal with stronger and weaker institutions differently. We wanted to rely more on disclosure and market discipline, with investors judging and taking risks for themselves. We also pushed for higher standards of corporate governance in the financial sector, to cultivate a stronger risk management culture, better internal controls, and greater transparency. Liberalising the financial sector Our second thrust was to liberalise the financial sector to promote competition and enterprise. We deregulated the stockbroking industry, and lowered protective barriers in banking and insurance. This would provide international institutions greater incentive to root more activities in Singapore, while spurring local institutions to upgrade their capabilities and sharpen their competitive edge.

We are happy that during the recent years, our financial sector has also improved in every respect. This is clearly evident when we look around the financial institutions, financial markets and the developments in financial infrastructure. Within the last five years, assets of the licensed banks in the country doubled. Altogether, there has been an addition of over 400 branches of these banks. Other financial institutions including Registered Finance Companies, Leasing Companies, Insurance Companies, Merchant banks, Venture capital firms and Unit Trusts have also grown in sympathy with the banking sector. At the same time, we have also progressed rapidly in the financial infrastructure developments as well. This is particularly visible with the leap forward in the Payment System development as evidenced by the implementation of a Real Time Gross Settlement System in 2003. Now, 84 per cent of the value of country’s payments are settled through the RTGS system. In 2006, we completed the Cheque Image Truncation project, reducing the maximum cheque clearance time to 2 working days, which is another significant achievement. The Colombo Stocks Exchange remains one of the most technically advanced stock exchanges of the world. Soon, we will also have a SWIFT Service Bureau in Sri Lanka and that will help to reduce cost of financial transactions. Together with these infrastructure developments, our banking system has expanded their horizons by introducing several innovative infrastructure facilities and complex financial products as well.