tharman shanmugaratnam : financial technology ( fintech ) transforming financial services in singapore speech by mr tharman shanmugaratnam, chairman of the monetary authority of singapore, at the launch of lattice80, singapore, 10 november 2016. * * * introduction 1 good morning. thank you for inviting me to join all of you. let me begin by congratulating marvelstone on the launch of lattice80. 2 it is the first innovation space in singapore dedicated to and designed specifically to support fintech. lattice80 is also the first not - for - profit private sector initiative in this business of nurturing start - ups. the fintech phenomenon 3 fintech – or financial technology – is transforming financial services, both from within established financial institutions and from outside the regulated sector through new, fintech players. 4 when fintechs first came to global prominence, it was tempting to cast this as a battle between new, innovative and responsive players and lumbering, flat - footed banks and other financial institutions. 5 the real picture is more nuanced, mainly because the incumbents have not been sitting still : many of them are investing heavily in technology to streamline and optimise entire swathes of operations. for example, several initiatives are underway among banks to tap on distributed ledger technology to achieve swift, seamless and secure trade settlement. several financial institutions have set up in - house fintech units to replicate the start - up culture. they are also collaborating with and, in some instances, buying over promising fintech companies. 6 and not many technology companies aspire to become financial institutions. complying with regulations, submitting to supervision, and churning out disclosure documents for the markets is not always an appealing prospect. 7 in short, the goliaths of the financial world have become more nimble - footed, and are both competing with and partnering the davids. 8 that said, we are still at an early stage of fintech, globally. it has spurred greater competition in every segment of the value chain of finance. it is too early to say who the winners will be. 9 the traditional financial institutions have the advantage of scale and a reputation amongst customers. but those that fail to keep up with technology will see part or all of their business models disrupted. consumers are cautious about shifting their wallets to new players, but they are also looking out for services that offer the best value. 10 but many fintech start - ups will also fail. it is

international standards, the numbers nevertheless indicate the overall soundness of the philippine banking system on account of continuing reforms in recent years. these include, among others, adherence to international best practices and the good governance tenets of fairness, accountability, transparency and social responsibility. capital market reform to broaden the funding sources of the economy, as well as to ease the vulnerability of banks to economic downturns, remains a priority for bangko sentral. in collaboration with other government agencies and the private sector, the bangko sentral worked for the completion of needed infrastructure that would enhance financial system integrity and overall market confidence. the operation of the fixed income exchange ( fie ) and the implementation of the third - party custodian scheme are part of these initiatives to provide viable and sustainable alternative sources of funds. the challenges ahead in the years ahead, the bangko sentral ng pilipinas will remain focused on its mandate of ensuring price stability by adhering to its inflation target ; ensuring that the banking sector remains sound and able to meet the financial requirements of the economy ; and ensuring the stability of the philippine payments system to minimize or prevent systemic risks. to pursue its price stability mandate, the monetary board, the policy - making body of the bangko sentral, will continue to rely on the following basic instruments : policy rates which are set every six weeks and influence the interest rates at which banks transact with their clients ; reserve requirements or the share of depositors'money that banks must set aside to meet withdrawals ; open market operations which allow the bangko sentral to influence the level of money circulating in the economy through the purchase or sale of government securities ; and rediscounting which encourages banks to finance priority economic activities such as exports and microfinance. the bangko sentral uses inflation targeting as a framework to maintain price stability. under this strategy, the bsp calibrates its policy actions to achieve the rate of inflation agreed upon with other economic agencies of government. adopted in 2002, this approach has served us in good stead. the challenge for us is to keep our forecasting tools on the money so that our policy rate decisions will generate the desired outcome when its full impact is absorbed by the economy 18 to 24 months down the road. yes, ladies and gentlemen ; this is the lag time we have to contend with in measuring the effectiveness of our policy response to ensure stable prices. as the sole issuer of philippine currency, the bangko sentral