Lee Hsien Loong: Capital markets in the new economy  Speech by Mr Lee Hsien Loong, Chairman of the Board of Directors of The Monetary Authority of Singapore and Deputy Prime Minister, at the 25th Anniversary Celebration Dinner of the Singapore Investment Banking Association, held in Singapore, on 6 September 2000. *  *  *  Chairman, SIBA, Mr Koh Kah Yeok, distinguished guests, ladies and gentlemen, Introduction I am happy to celebrate with the Singapore Investment Banking Association (SIBA) your 25th anniversary. For many years, SIBA has actively provided industry feedback on government policies, especially on capital market regulations and developments. These inputs have helped MAS to create a conducive environment for all financial players. Last November, your association broadened its charter, reconstituted itself to include a wider spectrum of activities and financial institutions, and changed its name to SIBA. This was a timely move. I am pleased to note that you have formed the SIBA Debt Capital Market Committee. As an MAS survey1 shows, corporate debt issuance more than doubled last year to $ 19.5 billion. In the first half of this year, corporate debt issuance is already $ 21.2 billion, exceeding the volume for the whole of last year. More diverse issuers are tapping the debt market, and interest from local investors has grown. An industry body to champion the development of the debt market, and institutionalise a feedback channel to MAS, will therefore play a useful role. Global trends in capital markets In the financial industry, globalisation is proceeding apace.

There has been a worldwide wave of consolidation among financial institutions, stock and derivative exchanges, and even regulatory bodies. In 1999, there were 900 merger-and-acquisition (M&A) transactions among banks, worth $ 300 billion worldwide.2 The securities industry has been no less active, with exchanges and clearinghouses in a flurry of mergers and alliances. While globalisation and integration are established features of capital markets, two more recent trends are noteworthy: firstly, stronger linkages between capital market and treasury activities, and secondly, the impact of technology and the internet on capital markets, particularly in the securities industry. MAS’ guidelines on treatment of credit derivatives and securitisation The links between capital market and treasury activities reflect an increase in cross-border transactions. In the US and Europe, the spate of mergers and acquisitions has boosted the volume of foreign exchange flows. The mergers have also led to greater use of securitisation and credit derivatives, and caused European credit derivative markets to expand significantly.3 1 2 3  1999 Survey of the Singapore corporate debt market. “European banking turns decisive corner on road to consolidation”, International Wealth Management, July 2000. “Use of credit derivatives in bank mergers soars”, International Financing Review, March 2000. 1  BIS Review 69/2000  In Singapore, the burgeoning capital market has similarly benefited our treasury industry. Increased debt issuance has led to more swaps and other money market activities. Participants are using more sophisticated treasury and capital market products. We must keep our regulatory framework up-to-date, so that it provides clarity, and allows growth and innovation.