lee hsien loong : financial sector liberalisation - going global speech by mr lee hsien loong, chairman of the board of directors of the monetary authority of singapore and deputy prime minister, at the monetary authority of singapore work plan seminar, held in singapore on 3 april 2000. * 1. * * introduction since 1997, while the asian region was undergoing a traumatic crisis followed by a sharp recovery, the international financial scene has not stood still. financial innovation has continued unabated, institutions are rationalising and consolidating, and transactions and services are rapidly going electronic and online. singapore has been directly affected by these global trends. it is as well that we pressed on with our financial liberalisation programme despite the crisis. mas and the industry have had a busy two years. it is timely now to take stock of what has been achieved, and map out the tasks ahead. our objective has been to open up the financial sector, progressively but decisively. we have aimed to allow market forces greater free play, get investors to take full responsibility for their decisions along with the outcomes, and shift mas ’ emphasis to setting the framework and upholding standards of integrity and supervision. ultimately, we aim to become a vibrant and dynamic global financial hub. how much of this vision have we so far realised? 2. financial sector reform - concrete changes we have made many concrete changes across the financial services industry. in banking, we have increased competition by introducing qualifying full bank privileges, issuing more restricted banking licences and providing greater flexibility for offshore banks. local banks have greater strategic autonomy and operational flexibility now that the limit on foreign shareholdings has been removed and several regulations revised. we have also opened up the stock market. the singapore exchange was the first in the asia - pacific to both demutualise and merge the cash and derivatives activities. sgx has made its listing requirements more flexible to cater to growth enterprises. we have loosened up rules on foreign listings in singapore dollars, reduced capital requirements for securities firms, and eased other onerous restrictions. by 1 january 2001, commissions will be completely freed up. access to trade on sgx, which is already being opened, will be fully liberalised a year later. in the debt market, we relaxed restrictions on borrowing s $, to enable foreign players to issue s $ bonds. we set up the approved bond intermediary scheme to encourage the origination, placement and management of debt issues in singapore. we also increased the issuance of

a credible and lasting solution in the eurozone all the more complex and challenging in the years to come. the problems in the eurozone and the us underline the absolute necessity for consistently sound banking practices and governance by banks. the crisis also provides lessons for regulators and the supervision of banks. the imf has found that regulatory intervention in spain lacked timeliness and effectiveness, even though the problems in banking had been identified early on. regulators must be prepared to take early and decisive corrective actions to forestall a build - up of risks in individual banks and the banking system as a whole. bis central bankers ’ speeches further, contagion amongst banks is a fact of life. financial systems can be severely stressed by their weakest points, even if it involves a single bank or a group of small banks. the northern rock episode in the uk was an example in the earlier phase of this crisis. the spanish cajas or regional savings banks are now another. the largest spanish banks are widely acknowledged to be well capitalised, to have lower exposure to the property sector and to have well diversified earnings internationally. but until the troubles in the cajas are resolved, even sound spanish banks are being penalised by higher funding costs, and citizens and tax payers too are exposed. confidence is therefore about banking systems, not just about individual banks. this is all the more why regulators have to be vigilant in spotting weaknesses and requiring corrective actions, both across a system and in individual banks. the weakest point matters. international regulatory reforms the global financial crisis has prompted a major review of international regulatory standards. we have achieved much, with the new rules developed through the basel committee on banking supervision and the financial stability board – new rules on the quantity and quality of capital and liquidity and the ongoing work to strengthen cross - border supervision and resolution frameworks for global banks. the basel committee has proposed several reforms to minimise the risk of failure of global systemically important banks ( “ g - sibs ” ), and to minimise the impact if any of them should fail. it is also recognised that some banks are systemically important within their own domestic markets even if they are not internationally active to the same extent as the g - sibs. the failure of these domestic systemically important banks ( “ d - sibs ” ) can have a major impact on an economy, and indeed unpredictable consequences for a broader region. bankia for example, is not a g - sib. the