They are a weak link in the maintenance of global best practices and regulatory and supervisory standards. If OFCs do not meet international standards they will provide an opportunity for regulatory arbitrage. Financial institutions may be tempted to migrate to such OFCs. This would make it very difficult for other jurisdictions to maintain or raise their own standards. There is work ahead to understand the roles and uses of OFCs and their implications for financial stability. Singapore, together with the other members of the OFC working group, will involve OFCs in this study. We aim to find ways to get them to meet international standards of cooperation in cross-border information exchange and enforcement. We must create incentives for OFCs to play by the rules or at least not disregard the rules. Bringing OFCs under the global regulatory umbrella will help raise prudential standards and enhance the stability of the global system. Strengthening domestic institutions The most important and reliable safeguard for economies which open themselves up to the global market is a strong domestic institutional framework. Governments must strengthen domestic financial institutions and companies by adopting best practices of financial supervision and corporate governance. Banks need a strong credit culture while other companies too need a rigorous business culture. In the helter-skelter growth before the crisis, Asian governments had neglected these institutional underpinnings. While this was not the sole cause of the crisis, in many countries weak domestic institutions undoubtedly made things much worse.

Mr Lee examines some of the major themes for strengthening the global financial system against the background of the financial crisis in Asia  Opening address by Mr Lee Hsien Loong, Chairman of the Board of Directors of The Monetary Authority of Singapore and Deputy Prime Minister at the fifth meeting of Finance and Central Bank deputies on the Manila Framework at Shangri-La Hotel on 29 August 1999. *  *  *  Introduction I am happy to address the Manila Framework Group. Prospects for the region have brightened considerably since your inaugural gathering in November 1997, in the depths of the regional economic turmoil. The worst of the crisis is now well past. Most of the crisis-countries are seeing growth again. Investor sentiment, while edgy, is generally upbeat. Equity markets have surged, some beyond pre-crisis levels. Currencies have stabilised; indeed some governments have had to temper the appreciation of their currencies. But financial markets are notorious for their short-term memories. An upturn does not necessarily mean that basic problems have been solved. It remains important for financial regulators and policymakers to remain mindful of the lessons thrown up by the crisis and to tackle them before another storm blows up. No two Asian economies are the same. During the crisis, hardly any were spared the panic and contagion. But how each was struck, how external problems interacted with internal weaknesses and how each government responded, varied from country to country. These diverse experiences offer rich materials for study and contrast.