the lcr requirement to all banks in singapore in the first instance and grant various reliefs on the basis of risk - mitigating circumstances. • we will also have a tighter definition of what qualifies as eligible liquid assets and not recognise equities and mortgage - backed securities. mas has issued a consultation paper on the implementation of the lcr framework and will carefully consider industry feedback. constraining leverage the third important area of reform is in constraining the build up of excessive leverage. at the height of the crisis in 2008, the banking industry was forced by markets to reduce leverage in a manner that led to downward pressure on asset prices, which in turn led to losses, declines in bank capital, and contraction in credit. even banks with high risk - based capital adequacy ratios were found to be excessively leveraged. basel iii ’ s leverage ratio seeks to set a 3 % floor for the amount of tier 1 capital that a bank needs to hold relative to its total exposure. the ratio is designed as a non - risk based measure to complement the risk - sensitive capital adequacy ratios. it acts like a stop - gap to constrain the overall size of the balance sheet, especially given the uncertainty involved in the risk models that banks use to calculate their capital needs. but the leverage ratio – precisely because it is a non - risk based measure – cannot be a substitute for risk - based capital requirements and should not be set at too high a level as to become the binding constraint on banks. if it were so, banks may have the perverse incentive to increase their exposure to risky assets so as to earn a higher return on capital. the final calibration and definition of the leverage ratio is expected to be finalised in 2017, with the minimum leverage ratio requirement coming into effect in 2018. singaporeincorporated banks can comfortably meet the current testing minimum of a 3 % leverage ratio. bis central bankers ’ speeches making otc derivatives trading safer the fourth fundamental area of reform is in the otc derivatives market. the crisis highlighted how the opaque inter - connections across financial institutions engaged in trading complex derivative contracts over - the - counter led to rapid contagion and systemic crisis when liquidity suddenly dried up. reforms have focused on four areas : standardisation of derivative contracts ; central clearing ; higher margin requirements for non - centrally cleared trades ; and mandatory reporting of all trades. in particular, reporting to trade repositories will provide much -

their customers to set up the appropriate management information systems that could enhance the relevant disclosures. and this takes me to the third challenge which is the overall interaction of credit institutions with their clientele. it is in the interest of both clients and banks to cultivate a relationship of mutual respect and trust. to this point, the recently introduced alternative procedure for the simplification of the auditing of the financial statements of very small businesses should support these efforts and facilitate the timely transmission of the financial statements to the credit institutions. it is of utmost importance that a timely flow of up - to - date customers'financials is maintained by banks at all times. unquestionably, this will be beneficial for both parties, banks and clients, as any events signalling a deterioration of the client's financial standing will be captured early on. consequently the most suitable restructuring solution may be sought, which could ensure the continuation of a healthy and economically viable business relationship. conclusion to sum up, the world's economies have been through a lot in recent years, from the challenge of the pandemic, to the impact of the war in ukraine. it is up to us to come through these challenges unscathed or even stronger, wiser and better prepared for a brighter future. we have done it before, we can do it again. after all, to quote gever tulley ( an american writer, speaker, educator, and entrepreneur ) - persistence and resilience only come from having been given the chance to work through difficult problems. thank you for your attention. 4 / 4 bis - central bankers'speeches