losses effectively in a crisis. this is necessary to protect depositors, reduce risks to the real economy, and safeguard our financial stability. the experience of countries at the centre of the crisis in europe and the u. s. showed that the total cost of a financial crisis to the economy and the public can be substantial. ( ii ) second, common equity tier 1 capital requirements that are significantly above basel iii will not result in a large reduction in economic output but would be beneficial in reducing the likelihood and cost of a crisis. several empirical studies confirm this. notably, the basel committee ’ s assessment of the long - term economic impact of basel iii was that the economic costs of going above basel minimums were still lower than the costs arising from banking crises. in deciding on the levels appropriate for singapore, mas carefully weighed the costs of additional capital against the benefits. banks that are well - capitalised, prudently regulated, and located in stable financial centres such as singapore, present an attractive value proposition to depositors and investors. holding systemicallyimportant banks to a higher solvency standard reduces both the likelihood of failure and impact to the real economy if one of them runs into difficulties. ( iii ) third, the impact on banks ’ capital structures will be manageable. this is, in part, due to the already high internal capital buffers held by the banks and also due to the transition arrangements that will apply. in short, the locally - incorporated banks are in a good position to meet the higher capital adequacy requirements and will emerge stronger in a post - basel iii world. institutional structure of banking one strand of the regulatory debate that is still ongoing relates to whether reforms to how banks structure themselves can help promote financial stability. there are several dimensions to this. i will focus on the dimension that is most relevant to singapore as a financial centre. this relates to the merits of the universal branching model compared to a subsidiary model for retail banking. most foreign banks in singapore operate under a universal branching model. branches here undertake a combination of retail, commercial, and investment banking activities, without the need to legally separate these activities. some other regulators prefer that banks operating in their jurisdictions operate as subsidiaries, or separate the retail and wholesale activities into different legal entities. mas has a long history of permitting the universal branching model and we continue to support it. the universal branching model provides significant efficiency benefits for banks. it permits a bank to take advantage of economies of scale by sharing management resources and

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