heng swee keat : achieving good regulatory outcomes – the way forward welcome speech by mr heng swee keat, managing director of the monetary authority of singapore, at the 16th international conference of banking supervisors, singapore, 22 september 2010. * * * 1. good morning. my colleagues and i at the monetary authority of singapore are delighted to welcome you to singapore, and to the 16th international conference of banking supervisors ( icbs ). we are honoured to join the basel committee on banking supervision ( bcbs ) as organisers of the conference. looking back on the crisis 2. when we last met in brussels in september 2008, the collapse of lehman brothers triggered a tail - spin in the global financial system. the global economic outlook was then grim. decisive policy action has averted the worst scenarios of the crises, and the overall situation has improved significantly. still, financial vulnerabilities and uncertainty over the pace of global economic recovery remain. 3. this year ’ s icbs comes at a critical juncture. in the last two years, all of us, as national financial authorities, have undertaken extensive reviews to enhance the resilience of our financial systems. globally, the fsb and imf have been working to forge agreement on measures to prevent and mitigate a crisis of such systemic proportions. in particular, the basel committee under the leadership of governor nout wellink has been at the forefront of devising a new regulatory framework that underpins and fosters a more resilient global banking system. 4. by bringing together senior officials from central banks and supervisory agencies from over 100 countries, this year ’ s meeting will provide the platform for us to move ahead on the core of the regulatory changes, and to chart the direction for the remaining areas of work. 5. the two themes for this year ’ s conference – building a more resilient banking system, and creating a stable financial environment for sustained economic growth underscore two key principles. first, the financial system needs to be resilient to avoid destabilizing the economy. second, beyond resilience, rebuilding the nexus between the financial sector and the real sector is critical to supporting growth and development. this is particularly important in many emerging economies where the pace of financial sector development has not caught up with that of the real economy. 6. let me now share some reflections on three themes that permeate discussion on financial resilience – microprudential regulations, macroprude

##ntial regulations, and supervisory approach. the basel committee ’ s reforms 7. many banks entered the crisis with too much leverage, too little capital and inadequate liquidity buffers. we need better micro - prudential regulations. banks need to reduce leverage, have higher quality and quantity of capital to absorb losses, and maintain a higher proportion of liquid assets to withstand shocks in the funding markets. 8. the basel committee has agreed on the need for standards relating to capital, liquidity and leverage. these first set of parameters for core capital has been carefully calibrated after considering the conditions in the various economies, as well as the results of the bottom - up quantitative impact studies and the top - down macroeconomic impact of the proposed changes. the phase - in arrangement for the new benchmarks strikes an important balance between strengthening the financial system and supporting economic recovery. singapore supports the basel committee ’ s reforms, and the further work to be done. 9. going forward, our key challenge is to ensure robust implementation of these new capital standards. in an interconnected global system, major problems in one part of the system will eventually affect us directly or indirectly, through various channels. all economies, whether advanced or emerging, and whether they had a direct banking crisis or not, have therefore a shared interest in strengthening the resilience of the global financial system. 10. however, as we phase - in these measures, we need to be vigilant that these do not have unintended consequences on credit availability and economic growth, or in reducing diversity in the financial system. 11. in striving towards a convergence in regulatory standards in order to preserve a level playing field across jurisdictions, we should be cognizant that the starting conditions and future challenges of countries differ. for many emerging economies, their priority lies not in re - capitalising banks or reducing leverage, but in continuing the reform of the banking system and in developing deeper capital markets to support future economic expansion. moreover, banks in emerging markets vary in size, sophistication and systemic significance – some are small and domestically focused, while others have sizeable regional footprints. most emerging economies are also hosts to global banks, and rely on them to provide trade and project finance, and cross border remittances. let me emphasise that these differences do not detract from the need to have higher regulatory standards. however, it does mean that in calibrating the details of the rules, we have to take into