Heng Swee Keat: Singapore’s investment banking industry and capital markets Keynote address by Mr Heng Swee Keat, Managing Director of Monetary Authority of Singapore, at the Singapore Investment Banking Association 30th Anniversary Dinner, Singapore, 6 October 2005. *  *  *  I am honoured to address this distinguished audience, and to join you in celebrating the 30th anniversary of the establishment of SIBA. May I thank the Chairman and the Committee for this honour. Global investment banking trends In the 30 years since SIBA's predecessor body, the Merchant Bankers Association, was set up, the business of underwriting and trading has been dramatically transformed. The globalization of capital markets, driven by liberalisation and technological advances, has created a web of interconnected markets. This has facilitated innovation and sharpened competition. Financial transactions now transcend sovereign borders as well as traditional product lines. Investors have also become more sophisticated and demanding, and a new array of products has evolved to meet complex needs. This has led to significant growth, for example, of derivatives instruments to complement the cash markets, including within Asia. Responding to these new challenges, investment banks have deepened capabilities, and many have also undergone significant consolidation, to achieve scale and depth. Beyond the traditional underwriting business, advisory and fees-related businesses have expanded. Investment banks also structure, market and trade in a full range of financial instruments - equities, fixed income, derivatives and hybrid instruments.

As I initially explained, the institutional reforms that have been adopted or are being adopted to establish a banking union constitute important progress. But to meet the ultimate objective of strengthening financial stability, implementation is key. And implementation is well under way: the Supervisory Board has held its first three meetings; a Framework Regulation has been prepared and is now the subject of a public consultation; and work is progressing on the supervisory model of the SSM with the Supervisory Manual. One of the first major implementation tests is the comprehensive assessment, the health check of the euro area banking system, which is currently being conducted as a prelude to the SSM becoming operational. Here, the ECB is making good progress in establishing the new structures and ensuring that the exercise will be fair, transparent and stringent. But many more steps still lie ahead of us. A final challenge relates to the macro-prudential arm of the SSM. As you know, the SSM Regulation gives the ECB the power to apply stricter macro-prudential measures than the national authorities if it deems them necessary. We can also advise on the calibration of instruments. This goes some way towards insuring against an inaction bias at the national level, thus improving the prospects for a more stable euro area financial system. We will maintain a clear separation of objectives between the macro-prudential policy framework and monetary policy and a clear hierarchy, with price stability remaining the ECB’s overall primary objective.