But it will strive to supervise institutions without placing unnecessary regulatory burdens on well-managed individual institutions or inhibiting the innovation and dynamism of the financial sector. Compliance costs of supervisory actions will be commensurate with the risks posed by the individual institutions. We will seek consistency in applying equivalent prudential and market conduct standards to financial institutions conducting similar business activities that are subject to the same risks. Harmonising and integrating regulations and supervisory practices across financial activities will reduce opportunities for regulatory arbitrage. Working towards more win-win outcomes for Singapore and the region Second, we must work towards more win-win outcomes for Singapore and the region. The growth and development of Singapore depends on the health of the world economy, and the wellbeing of our neighbours and trading partners. As a hub and gateway in this region, Singapore benefits if the region is competitive and attractive to investors and new businesses. Southeast Asia must work together to make itself more attractive, especially with new opportunities and competition arising in North East Asia. Last month, ASEAN leaders agreed in Bali to build an ASEAN Economic Community by 2020 - a single market and production base with free flow of goods, services, investments, capital and skilled labour. Asian countries need to foster closer cooperation and integration between financial systems and markets in the region. This will facilitate the financing, and payment and settlement of intra-regional trade.

It is up to the Singapore banks and their shareholders to consider these opposing arguments and continually reassess their strategies. They will need to decide whether they need further scale to compete effectively, and if so whether it should be achieved through consolidation at home, expansion and acquisition abroad, or a combination of both. MAS cannot make this judgment for them, though the continued strength of our banking system depends on their making the right judgment call. Whatever the outcome, we need a core of strong local banks, as the stability of our financial system hinges on that. Overall, the prospects for our financial centre look good. Last year, employment fell slightly because of mergers, consolidation and the general economic weakness, but the worst seems to be behind us. More jobs are being created by the new activities that are being attracted here and by expansion in  5  FitchRatings, The Singapore Banking System, 19 Apr 2002.  established areas like wealth management. The financial sector will continue to be an important contributor to economic growth. IV. Progress review of MAS’ 2003 business priorities  Let us now briefly review how well MAS has achieved its business priorities over the past year before we focus on what we must do to grasp the opportunities arising from the financial services upturn. Managing within a riskier environment First, managing within a riskier environment. The financial industry is ever-changing - risk management practices are constantly being tested and challenged by new business models and financial products.