It took over supervision of the insurance industry in 1977, and the securities industry in 1984. From the beginning, MAS’ approach to supervising the financial sector was centred on a strict admission policy, high prudential requirements, and rigorous enforcement. We sought not only to maintain systemic stability, but also to protect individual institutions from failing, and the public and investors from losses. Lacking any track record, this approach was necessary to establish credibility with international financial institutions and their home regulators. When it emerged that Singapore had been spared the fallout from the collapse of BCCI because MAS had steadfastly refused BCCI entry despite persistent lobbying, MAS’ reputation as a thorough and uncompromising regulator went up. But despite our best efforts, we did have one major failure – the Pan-El crisis in 1985. Pan Electric Industries, or Pan-El, was a holding company with interests in hotels, property and marine operations. It went into receivership in November 1985, threatening the solvency of many stockbroking firms with whom it had forward contracts. MAS closed the stock exchange for 3 days while a lifeboat fund was organised. The four major local banks agreed to provide a standby line of credit, to aid the affected stockbrokers and restore market confidence. Pan-El showed up certain weaknesses in our regulatory framework. Following Pan-El, MAS revamped the Securities Industry Act, raising standards and putting in place mechanisms for the proper regulation of the market. MAS considerably tightened its supervision of the stock exchange and the securities industry.

Technology and competition are transforming the way in which financial services are produced and distributed, and driving the convergence of financial products and service providers. The traditional divides between banks, securities firms, and insurers are blurring. Securities firms are offering deposit-like products; banks are selling insurance under the rubric of ”bancassurance”; and insurance companies are offering investment-linked products as substitutes for unit trusts. As Mr Andrew Crockett, General Manager of the BIS, said recently, the challenge for regulators will be to 2 ”create rules of the game that are robust to fad, fashions and arbitrage” . How should MAS respond? How should MAS respond to these challenges? Our objective remains to promote a sound and progressive financial sector. Our approach to rule-setting must adapt to new developments, be sensitive to the effects of regulation on industry, and be focussed in identifying and addressing risks. We have already broadened the limits within which institutions have free play. We must now aim to develop a pro-enterprise supervisory framework that will encourage innovation and dynamism without compromising the safety and soundness of the financial system. Such a framework will comprise the following elements: ·  risk-focussed, consolidated supervision;  ·  harmonised regulation;  ·  sound corporate governance; and  ·  effective market discipline. Let me elaborate on these elements of the new framework. Risk-focussed, consolidated supervision We are adopting a risk-focussed, consolidated approach to the supervision of financial institutions. We will place more emphasis on understanding and evaluating an institution’s risk management systems and internal controls.