While this means that MAS will be more probing in our supervision and dealings with financial institutions than in the past, we will need to be careful that this does not create an overly legalistic and combative relationship with the regulated entities. We share a common objective in having a regime that encourages growth based on sound and ethical business practices, and adherence to the spirit and letter of MAS’ standards, so that consumers can be well served. Consumers too have to play their part. The recent crisis reinforces the importance of investing only in products that they understand and taking steps to better safeguard their interests when making investment decisions. Although these points have been highlighted in various MoneySENSE guides and seminars, in times of rising asset markets, outreach efforts had not been easy, but we must persist. To help investors understand common financial products, we launched the MyMoney programme, in partnership with ABS, the Securities Investors Association (SIAS) and the Singapore Management University’s Sim Kee Boon Institute for Financial Economics. Speakers shared facts on the risks in investment products such as structured deposits, unit trusts, bonds and investment linked policies, highlighting risk-return trade-offs, and key issues consumers should consider before deciding whether to purchase a product. Going forward, we need to focus on new products when they are launched. We would like to see financial institutions organise educational initiatives in partnership with independent experts, when they launch products with features or structures that are new to the market.

The Basel Committee has proposed several reforms to minimise the risk of failure of global systemically important banks (“G-SIBs”), and to minimise the impact if any of them should fail. It is also recognised that some banks are systemically important within their own domestic markets even if they are not internationally active to the same extent as the G-SIBs. The failure of these domestic systemically important banks (“D-SIBs”) can have a major impact on an economy, and indeed unpredictable consequences for a broader region. Bankia for example, is not a G-SIB. The Basel Committee has recommended higher loss absorbency requirements for G-SIBs, and is studying an appropriate regulatory framework for D-SIBs. MAS is very much part of that discussion. However, in order to keep to the spirit and intent of the new measures, sensible judgement will be the key to implementing the new rules. Sensible implementation requires national regulators to take into account the impact of their actions on economic growth and international finance even as they exercise national discretion to address prudential issues in their banking system. There are two risks of a broader nature that we have to keep clearly in focus in international discussions, so that what we do now to strengthen our respective national systems does not lead to new problems and vulnerabilities internationally, further down the road. First, we have to ensure that the cumulation of enhanced capital and other requirements on global banks do not impede them from playing their critical roles in global finance.