Heng Swee Keat: A more challenging global and domestic economic environment Opening remarks by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at the Monetary Authority of Singapore’s Annual Report 2007/2008 Press Conference, Singapore, 24 July 2008. *  *  *  1. There is heightened uncertainty in the global economy and financial markets. The US subprime mortgage crisis has led to financial turbulence that hit many American and European financial institutions, forcing them to recapitalize and tighten lending standards. These stresses in financial markets have been a drag on economic activity in the industrialized countries through various channels, including the adjustment in the housing market and wider credit spreads. 2. The pace of US economic growth is slowing, constrained by the ongoing credit crisis, the unprecedented fall in the housing markets across the country, and rising commodity prices. In Europe and Japan, business expectations and consumer confidence continue to weaken. In Asia, growth has held up relatively well, helped in part by the robust expansion in China and India so far. Nonetheless, rising inflation will impact the real earnings of households and corporates in the region, with a concomitant pullback in spending. Overall, global growth is expected to fall to 2.9% this year from 3.8% in 2007. At the same time, inflation has emerged as a significant risk factor. Slower growth, together with rising inflationary pressures, presents challenges for the global economy. 3. In Singapore, economic activity is moderating.

To continue to strengthen corporate governance, MAS, together with Accounting and Corporate Regulatory Authority (ACRA) and SGX, have established an industry-led Audit Committee Guidance Committee (ACGC). The ACGC will develop guidance to assist audit  BIS Review 94/2008  3  committees better understand and carry out their role and responsibilities. MAS, ACRA and SGX are also working with the Singapore Institute of Directors to review the professional development of directors in Singapore. 22. In the area of insurance, we have set out mandatory requirements to strengthen life insurers’ internal governance practices on the management of their participating funds and enhance disclosure standards to participating stakeholders. To enable policyholders to access a wider and more cost effective range of Investment-Linked Insurance Products (ILPs), MAS revised ILP rules. Singapore’s financial sector 23. Let me now turn to the performance of our financial sector. Notwithstanding the onset of the global financial turmoil towards the end of the year, the domestic financial services sector recorded strong growth in 2007. Growth was broad-based, across all segments of the industry. Domestic non-bank credit registered strong gains while the Asian Dollar Market also strengthened. 24. Singapore’s financial centre continues to grow in diversity. We remain the largest REITs centre in Asia-ex-Japan, and a pipeline of business trusts in sectors such as shipping, aviation and infrastructure is being developed. A broad suite of instruments from FX, fixed income, derivatives to commodities are now traded here, contributing to the growth of Singapore as a trading hub.