We offer political and economic stability, the rule of law, efficient infrastructure and a highly-skilled professional workforce. These are exceptional attributes, which lend themselves well to activities like wealth management. We need to find new ways to market them and bring in business. Enhancing monetary policy effectiveness Our decision to progressively relax restrictions on the use of the Singapore dollar was a calculated risk. At a time of heightened volatility in currency markets, it stood in stark contrast to our regional neighbours. However, the liberalisation has yielded dividends. Our capital markets have grown and deepened without adversely affecting our ability to manage the exchange rate. In practical terms, we have now gone as far as we can to relax the restrictions while still maintaining the principle of not-internationalising the Singapore dollar. All but two restrictions have been lifted – thou shalt not borrow Singapore dollars to speculate in the currency, and if thou shouldst borrow for offshore purposes, then thou shalt either swap or convert the Singapore dollars before taking them out. These remaining commandments are an important signal that we have not changed our fundamental stand against outright speculation on the Singapore dollar, even though we have permitted nearly all activities of legitimate investors. 3  Today outstanding SGS is about $ billion, compared to just over $ billion in 1997. 4  From 1998 to 2001, corporate debt issuance in Singapore has increased eightfold to $ billion.

There was a wave of mergers and acquisitions, as institutions sought to diversify risks, reduce costs, and exploit synergies. Financial centres faced similar pressures. As technology eroded time-zone advantages, institutions consolidated their activities within fewer financial centres. We believed that consolidation was imminent in our time zone. If there were to be only a few financial centres left in Asia, we wanted to make sure that Singapore was one of them. So we launched a fundamental rethink of our approach to supervising and developing the financial sector. Creating a more conducive regulatory environment Our new approach could be broadly summarised in four main thrusts. First, we sought to create a more conducive regulatory environment to foster dynamism and innovation, while maintaining the safety and soundness of our financial sector. MAS shifted its emphasis from regulation to risk-focused supervision, so that we could deal with stronger and weaker institutions differently. We wanted to rely more on disclosure and market discipline, with investors judging and taking risks for themselves. We also pushed for higher standards of corporate governance in the financial sector, to cultivate a stronger risk management culture, better internal controls, and greater transparency. Liberalising the financial sector Our second thrust was to liberalise the financial sector to promote competition and enterprise. We deregulated the stockbroking industry, and lowered protective barriers in banking and insurance. This would provide international institutions greater incentive to root more activities in Singapore, while spurring local institutions to upgrade their capabilities and sharpen their competitive edge.