john palmer : basel ii and beyond opening address by mr john palmer, deputy managing director of the monetary authority of singapore, at the mas risk conference, singapore, 12 july 2004. * * * introduction good morning. welcome to the mas risk conference, and for visitors to these shores - welcome to singapore. the conference is held at an opportune time. it was only two weeks ago that the basel committee on banking supervision released the basel ii capital framework. this is enough time for all of you to have read the full text, and recent enough for you to remember most of what you have read. not surprisingly, my remarks this morning will be focused on basel ii. they are drawn from my perspectives as a policy maker who actively supported the development of the basel ii framework, and as a prudential supervisor now faced with the challenge of implementing this new framework. i intend to offer a perspective on basel ii, some of the challenges that remain to be addressed and offer some thoughts on the future evolution of capital adequacy rules for banks. later in the conference, my colleague, low kwok mun, will discuss mas ’ approach to basel ii implementation, including requirements for local banks and some important home / host supervisory issues. why basel ii? what is good about it? and what are the implementation challenges? developing basel ii turned out to be an immense challenge. implementing it will be no less challenging. but the challenges are necessary ones, as i see it. basel ii was made necessary and inevitable by the evolution of the banking sector following the introduction of basel i, particularly the growth of internationally active banks and improvements in their risk management practices. global trends and banking sector developments a number of factors over the last two decades have resulted in bigger, more international and more diversified banking institutions. many banking institutions have seized the opportunities presented by liberalisation and globalisation to expand beyond their home bases and traditional lines of business. at the same time, rapid technological advances, particularly in computing, allowed for the streamlining of operational processes and made possible the effective management of large international financial conglomerates by reducing some of the inefficiencies of scale. many, though certainly not all, of the banking institutions that expanded in this way have been quite successful. they have benefited from economies of scale. furthermore, the broader product range and presence in multiple economic zones have helped to smooth product and economic cycles. advancements in risk management but, expansion has brought with it significant risk management challenges.

moneysense will soon launch a tv game show requiring participants to make financial decisions such as on whether to purchase certain items, whether to take on more credit, whether to take up insurance and whether to invest in certain financial products. a preview of this new tv game show will be staged at this roadshow on sunday. so look out for this sneak preview. 10. these are all good initiatives. but our financial education outreach can progress faster, and reach many more people, if we make the most of our collaborations with the unions, community centres and other organisations are here today. i encourage all of you to work with moneysense to bring financial education to residents in your neighbourhoods, to your workplaces, and to your members. in this regard, i am happy to know that ntuc is planning to organise moneysense programmes for its members. moneysense encourages students to be ambassadors of financial education 11. it is also important to begin young. the ministry of education ( moe ) has promoted financial literacy in schools so that students get a basic sense of money matters and of the need to save and spend wisely, from young. financial education messages are taught through subjects such as social studies and civics and moral education at the primary and secondary levels. our teachers have also been given resources and training to enable them to deliver financial literacy lessons effectively. ( one of the resources well - received by teachers is a cd - rom entitled'promoting financial literacy in schools'which comprises illustrations and case - studies to facilitate class discussions on financial literacy matters and issues. workshops focusing on hands - on activities are also conducted annually to enhance teachers'competency in financial literacy. ) 12. about 30 schools, through moneysense, have enhanced their financial literacy programmes by conducting enrichment activities. these include interactive board games on prudent money management, workshops on financial matters such as debt, insurance and financial planning and inter - school financial literacy competitions. to date, over 4, 000 students had participated in such activities. 13. today, i'm pleased to announce a new programme to encourage students who have attended moneysense activities arranged by their schools to be " moneysense ambassadors ". this includes the many students here today for the inter - school moneysense games competition. 14. having learnt some basic money management skills through the workshops, i hope you will use these skills and pass them on to your friends. an important step towards good money management is to plan your expenditure and savings.