Koh Yong Guan: Regulatory approaches in global capital markets Keynote address by Mr Koh Yong Guan, Managing Director of the Monetary Authority of Singapore, at the MAS Capital Markets Seminar 2002, Singapore, 2 May 2002. *  *  *  MAS Capital Markets Seminar Ladies and Gentlemen Good morning and a warm welcome to the MAS Capital Markets Seminar. For participants from abroad, I wish you a pleasant and rewarding time in Singapore. We have chosen “Evolving Regulatory Approaches” as the theme to underscore the importance for regulators to keep pace with developments in the global capital markets. Advances in technology have enabled instantaneous and seamless access into diverse capital markets. At the same time, consolidation of specialist financial institutions into financial conglomerates with cross-border presence has redefined traditional notions of market boundaries. The consequent growth in cross-border transactions poses regulatory challenges to national regulators supervising global market players. As we have seen in recent months, a single event in one market can create significant ripple effects elsewhere. These developments have not been lost on regulators. Having no less than 12 countries represented here today bears testimony to the importance attached to learning from fellow regulators. One key reason for organising the capital market seminar is to facilitate the exchange of views and sharing of ideas. The occasion also provides an opportunity for regulators to get to know one another better.

Put another way, similar activities that involve identical risk issues should be regulated on an equal basis to avoid tilting the playing field. Failure to do so will result in regulatory arbitrage and cause activities to migrate towards looser controls. In Singapore, the regulators for banking, securities and insurance activities are consolidated in MAS. Specific to the capital market, we have integrated our legislation for the securities and futures industries, and harmonised our regulation of the financial advisory business to support the cross-selling of products. What is critical however, is not how regulatory responsibility is divided or consolidated into one or more agencies. The overriding objective is equitable treatment and consistency in the approach to the measurement and management of risk. Capital requirements illustrate this most clearly. Most regulatory models have moved away from setting fixed minimum capital for regulated activities. In banks as for capital market intermediaries, regulators are adopting and refining the risk based regulatory approach. Where risks take on a similar profile therefore, the capital charges should be aligned based on a consistent principle. This is so even as the risk management regime in the banking, securities and insurance sectors retains some distinctive features that recognises the differences in these businesses. Legislative initiatives in Singapore In Singapore, at the heart of the regulatory framework for the capital markets is the Securities and Futures Act (“SFA”) which was enacted in September last year. The SFA is an omnibus Act that sets out the regulatory framework for the capital market.