. loan - to - value ratios not only raise the buffer for losses but can also constrain credit growth in the economy. similarly, macro - measures such as the tightening of interest rates can also lean against the build - up of asset prices and serve a microprudential purpose. pursuing macroprudential objectives therefore does not mean that we have to have a narrow box of tools, each dedicated to a specific purpose. in fact, the interaction of various tools is significant – they can work in the same or opposite directions, and their cumulative impact may be greater or smaller than we anticipate. it is probably more appropriate for us to take an eclectic and holistic approach. 22. finally, as a corollary of the above, micro - and macro - supervision should not be done in silo. in fact, we need to bring together the perspectives and tools from different stakeholders – central banks and financial supervisors, as well as government agencies that can contribute to financial stability. the property sector cooling measures introduced in singapore and a number of asian countries recently, involved close cross - agency cooperation and coordination amongst financial regulators, fiscal authorities and the land offices of the respective countries. bringing together the various agencies expands the policy options to deal with systemic risks. different countries have different institutional arrangements, so each country will need to decide on the optimal arrangements. achieving regulatory outcomes through effective supervision and shared responsibility with industry 23. let me now say a few words on achieving regulatory outcomes, beyond good rules. perhaps the most striking area is the critical need for all of us to strengthen supervision. effective supervision is unapologetically firm and intense, grounded on a good understanding of the nature of the institutions and the financial system. supervisors must think independently, avoid regulatory capture and be willing to enforce out - of - bound markers rigorously. in this regard, i welcome the efforts of fsb and standard setters in developing recommendations for more effective supervision of complex and systemic institutions. 24. effective supervision requires talented and trained staff, who can understand and respond constantly to new markets, new services, and new risks. the need for talent is particularly acute for supervisors in emerging economies, as the banking system grows rapidly. with the growing demand for risk managers, some supervisors are facing higher attrition. we have to significantly expand the talent pool, and work with international and regional bodies like the fsi, the world bank and imf to step up our efforts. 25. finally, supervisors should not be

tharman shanmugaratnam : ensuring strong anchors in our banking system speech by dpm tharman shanmugaratnam, chairman of the monetary authority of singapore, at the 39th association of banks in singapore ( abs ) annual dinner, singapore, 28 june 2012. * * * mr. piyush gupta, chairman of the abs, council members, ladies and gentlemen, i am happy to be here this evening to join you at the 39th abs annual dinner. the continuing lessons from the crisis four years after lehman brothers collapsed, the global financial crisis is still with us. its new epicenter, as we all know, is in europe. the combination of weak banking systems and overstretched government balance sheets in several european economies has proved toxic. it has led to a loss of confidence and unsustainably high borrowing costs, not just for greece but for a few other larger eurozone economies. it has also resulted in the virtual disappearance of the unsecured interbank market, which is the lifeblood of any financial system. each major crisis yields lessons for all countries, and there will be many lessons arising from the crisis in europe. in several european economies, as in the us, entitlement spending by government has outrun future revenues, and it is no longer possible to borrow away the problem. but there are major lessons too in banking, and the main ones are in fact the old lessons. spain, the current focus of attention in the markets, is a case in point. its government finances were in fact in better shape than in many other advanced countries. but troubles had been accumulating in its banking system, caused especially by small and medium sized banks having made excessive loans to a property sector that has now crashed – a familiar problem repeated almost in cycles, across a range of countries. the result is a cutback in credit, a deeper recession, greater strain on government finances both as revenues decline and the government is forced to bail out banks, and worsening bank balance sheets as banking assets lose further value and borrowing costs increase. we are therefore seeing a vicious cycle of economic decline and a loss of confidence. the situation is not unique to spain. the specifics of the balance sheet problems vary from country to country, but a self - reinforcing cycle of feedbacks between falling economic activity and weak bank and sovereign balance sheets is now taking place in several countries in europe. it is complicated by an increasing fragmentation in politics, which makes the journey to