to a substantial accumulation of ofr, well in excess of what was required for mas ’ central banking operations. so, in 1981, the gic was set up – in today ’ s parlance, a sovereign wealth fund – to manage part of the reserves for higher returns without the central bank constraints of liquidity. part of the ofr was transferred from mas to gic, which was tasked to invest the reserves in a globally diversified portfolio of asset classes with a higher risk profile to deliver good long - term returns. the third pot of reserves is managed by temasek holdings, an investment company wholly owned by the government. 3 / 7 bis central bankers'speeches temasek ’ s history also dates back to the early years of singapore ’ s development. there was little private capital in those days but a rapidly industrialising economy needed key infrastructure – in aviation, in shipping, in telecommunications, in banking, and so on. the government therefore set up enterprises in these areas. temasek was formed as a holding company in 1974 for these enterprises so that the government could focus on its roles of policy making and regulation without conflict, while temasek would own and manage these investments on a commercial basis. today, temasek is an active, equity investor that aims to deliver sustainable long - term shareholder value. more than a quarter of temasek ’ s portfolio is invested in singapore, with the rest invested in asia and global markets. the initial portfolio was provided by the government, but since then, temasek ’ s funds have come mainly from the investment growth of its own portfolio. compared to mas and gic, temasek is further out on the risk - return spectrum. how are the ofr managed? let me now move to the third question : how are the ofr managed? this is the portion of the reserves that mas is responsible for. there are three prongs to mas ’ approach to managing the ofr robust risk management ; balanced asset allocation ; and efficient investment process robust risk management the starting point to mas ’ approach to managing the ofr is its risk management framework, which sets out the liquidity and risk tolerance levels of the ofr. these relate to : the ability of the portfolio to meet liquidity needs under stress conditions ; and the maximum loss of the portfolio under tail risk scenarios. these liquidity and risk tolerance levels are determined on the basis of what is minimally required to meet the objectives of the ofr in supporting

capital across its business lines, in addition to pooling its risks across the banking group. a branch can rely on the capital of the parent bank to borrow from the interbank market for funding purposes. this may not be possible for a local subsidiary with a smaller capital base. a branch structure can also give the banking group a greater ability to withstand idiosyncratic shocks to part of the group, because excess liquidity and capital from one part of the group can be redeployed to the parts in need. this, of course, is provided that the shock is not so large as to overwhelm the group as whole. bis central bankers ’ speeches during periods of severe stress, however, the close linkages between business functions in a single, integrated entity make it difficult to isolate and contain problems. the provision of essential services by a branch such as domestic lending and deposit - taking, as well as payment transactions, could be disrupted. local depositors would be exposed to possible contagion or a crisis of confidence arising from problems in the bank ’ s home market, or from problems related to its wholesale banking activities. mas imposes a number of regulatory requirements on the locally - incorporated banks to protect depositors, including the higher capital adequacy requirements that i mentioned earlier and a minimum paid - up capital of $ 1. 5 billion. however, there are qualified full banks ( qfbs ) and foreign full banks which operate as branches and accept retail deposits without any capital in singapore. mas ’ approach has been to closely supervise these branches. they are also required to be members of the deposit insurance scheme, which provides a safety net for all non - bank depositors by insuring their deposits up to $ 50, 000 per depositor per bank. there are clear benefits, however, for foreign banks with a large retail presence to operate their retail business from a locally - incorporated subsidiary. where the banks have corporate or investment banking businesses, these activities can continue to operate as part of their existing branches. this will allow banks to continue to benefit from cost efficiencies associated with a branch structure and minimise changes to their business models. moreover, by conducting retail activities from a separate locally - incorporated entity, the bank will be seen by local retail customers as being strongly committed to the local market for the long - term. international discussions on this topic are ongoing and mas is monitoring the debate closely. conclusion to conclude, singapore has built a reputation for credibility and prudence