heng swee keat : the impact of the global financial crisis on asia keynote speech by mr heng swee keat, managing director of the monetary authority of singapore, at the international institute of finance ( iif ) asia regional economic forum, singapore, 4 march 2009. * * * introduction ladies and gentlemen, good afternoon. i welcome the international institute for finance ( iif ) for holding its asia regional economic forum in singapore. it is good to see such a diverse group gathered here for this forum. an unprecedented crisis the most commonly used adjective to describe the current financial crisis is " unprecedented ". indeed, many aspects have been exceptional – • the speed at which events unfolded and triggered a series of domino effects ; • the scale of the impact, which has become global ; the range of financial institutions and investors affected ; • the near - perfect correlations of markets and asset classes that had been uncorrelated when conditions were benign ; • and the range of unconventional measures taken by financial authorities globally to try and arrest the unfolding crisis. these features of the crisis are exceptional. but perhaps the most crucial aspect that has had a profound effect on the dynamics of this crisis and its impact on emerging economies, is that unlike various past crises, this current crisis originated in the us. this is unlike various financial crises in the past 25 years or so – which tended to have certain recurring themes, and which tended to begin in emerging economies before their knock - on impact was felt internationally. the analytical tools and policy prescriptions for dealing with such crises became more tried and tested over time, even if applied in too dogmatic a fashion at times. global institutions, whether it was the imf, developed nations, or a consortium of strong international banks, had the wherewithal to bring sufficient resources to bear on the problem. crisis resolution was never easy but did not quite look insurmountable. not so this time. the epicenter of this crisis is the us – it is the world ’ s largest economy, holder of the international reserve currency, and home to the largest and most sophisticated financial system. so we are talking about the core of the global financial and economic system where severe problems arose and have since spread across borders. in the us, the “ shadow ” banking system grew rapidly but was quite opaque in the way it operated. before long, problems built up and spread to engulf the “ traditional ” banking sector. within a short time, commercial banking operations were severely

- performing loans are still unresolved in a number of countries, which means the risk situation differs strongly from one national banking system to the next. i will return to this particular point later in my statement today. while a recently published draft report by esther de lange at the european parliament does already address some of the criticism levelled at the commission proposal, that paper indicates that the proposed initial re - insurance phase starting in 2019 will still take place without any riskreduction measures whatsoever. that would be inacceptable in my view. my conclusion from this is that we should stick to the current system – harmonising the national deposit insurance schemes – as long as many outstanding issues remain unresolved. for all the progress that has been made towards deeper integration, european unity suffered something of a setback on 23 june this year. that was the day on which the uk electorate voted against the country ’ s continued membership of the european union. that brings us to the topic 1 / 5 bis central bankers'speeches of “ less europe ". i won ’ t wade into the political debate today, but focus instead on what brexit means for financial markets. five months on from the uk referendum, we can say that the european financial system has done a pretty good job overall of absorbing the outcome of the vote. apart from a bout of heightened financial market volatility, notable share price losses, particularly among bank stocks, and the sharp depreciation of sterling, the brexit vote did not unleash any turmoil in financial markets, nor, might i add, was there ever any risk of a financial crisis. there are two reasons for this. first, the good level of resilience that has now been achieved in the european financial system. second, and no less important, the response shown particularly by the bank of england. nonetheless, the long - run repercussions of the brexit vote will only really come into view when we get a better idea of the outcome of the forthcoming exit negotiations. the signals which the uk government is currently sending out would appear to suggest that a “ hard brexit ” might be in store – that is, the uk would leave not just the eu but also the european economic area. that would spell the end of the current eu passporting regime – an arrangement which presently enables financial institutions domiciled in the uk to offer their products and services across the entire european economic area. it also permits continental european institutions to