Since the mid-1990s, MAS has entered into a number of such MOUs to ensure that the level of regulatory collaboration keeps pace with the capital market linkages that are in place. A formal arrangement enshrined in an MOU may not be necessary in all cases, but are helpful amongst jurisdictions with substantive capital market linkages or trading arrangements in place. Impetus for international standards The second proposition is the growing impetus for international standards. In this regard, IOSCO has taken the lead in putting forward a set of principles which its members subscribe to. Some of the principles are necessarily pitched at a broad level, to allow members to agree on key areas which regulators should focus their attention. The challenge ahead is to continue working systematically on the principles to further cross-reference against quantifiable standards. There are several reasons why such international standards are important. Danger of a weak link in the system The first is that interconnected markets means that transactions involving intermediaries or markets in different jurisdictions are always exposed to the weakest link. As an example, a localised weak link in clearing and custody networks used for cross-border transactions that buckles under stress will have far reaching repercussions on the smooth functioning of counterparties and markets in other jurisdictions. 2  BIS Review 31/2002  Benchmarking The second reason is that, whereas regulations are developed for local usage, international standards are invariably developed under the close scrutiny of different regulators, and are derived after rigorous debate and sometimes protracted fine-tuning.

These include the Basle Committee’s work on a set of globally accepted principles of risk-based capital among banks; the Group of 30’s work in the area of standardising OTC documentation; and a collaborative effort by the Bank for International Settlements and IOSCO on recommended standards for securities settlement systems. Indirectly giving impetus to international best practices is the IMF and World Bank’s Financial Sector Assessment Programme (“FSAP”). Under this initiative, assessors will collaborate with regulators in participating jurisdictions to benchmark financial systems and practices against global standards. MAS is convinced that these efforts represent considerable value-add to the global regulatory environment and has participated in support of these initiatives. We will be undertaking an FSAP this year. As an international financial center, we are also committed to contributing to international financial stability as a member of the Financial Stability Forum, and have found our involvement in various of its working groups to be invaluable. The establishment of international standards and best practices as the way forward will become even more compelling as globalisation continues, and regulators should be prepared to stay engaged with the process. In doing so, it should be recognised that initiatives to draw up international standards in themselves also add value by prompting regulators to re-examine existing regulation and review the policy rationale behind them. This is useful in bringing dated practices back into line with international best practices. Improvements to comply with globally accepted principles will benefit the market’s growth and in the long term attract participants with strong internal controls.