Notably, the Basel Committee’s assessment of the long-term economic impact of Basel III was that the economic costs of going above Basel minimums were still lower than the costs arising from banking crises. In deciding on the levels appropriate for Singapore, MAS carefully weighed the costs of additional capital against the benefits. Banks that are well-capitalised, prudently regulated, and located in stable financial centres such as Singapore, present an attractive value proposition to depositors and investors. Holding systemicallyimportant banks to a higher solvency standard reduces both the likelihood of failure and impact to the real economy if one of them runs into difficulties. (iii)  Third, the impact on banks’ capital structures will be manageable. This is, in part, due to the already high internal capital buffers held by the banks and also due to the transition arrangements that will apply. In short, the locally-incorporated banks are in a good position to meet the higher capital adequacy requirements and will emerge stronger in a post-Basel III world. Institutional structure of banking One strand of the regulatory debate that is still ongoing relates to whether reforms to how banks structure themselves can help promote financial stability. There are several dimensions to this. I will focus on the dimension that is most relevant to Singapore as a financial centre. This relates to the merits of the universal branching model compared to a subsidiary model for retail banking. Most foreign banks in Singapore operate under a universal branching model.

  Second, resolution frameworks have to be established, to ensure that all banks, however complex or large, can be resolved in an efficient and safe manner. Such frameworks may involve the simplification of firm structures and the design of “bailin” mechanisms, where creditors are forced to absorb losses when a bank is close to failure2.   Third, G-SIFIs will face more intensive supervisory oversight, guided by an enhanced set of core principles for effective banking supervision. Singapore’s regulatory approach Many jurisdictions are now considering their responses to the FSB and Basel Committee recommendations. MAS’ regulatory approach is guided by three principles: (i)  First, we must maintain the high standards of financial regulation which have become associated with Singapore. Maintaining high regulatory standards is completely compatible with fostering a vibrant financial sector. Being a wellregulated, trusted and stable financial centre is a source of advantage for Singapore. It provides confidence for banks to operate in Singapore and for customers to transact with banks here. 2  “Bail-in” is the process where bank debt in failing firms is forcibly converted into equity. This is intended to make it possible to rapidly recapitalise a bank such that it can continue in business without an equity injection from taxpayers. 2  BIS central bankers’ speeches  (ii)  Second, our rules must be risk-appropriate. International standards must sometimes be enhanced to be appropriate for Singapore’s context. They must be targeted to address well-defined risks or concerns that could have systemic implications.