behaviour are deemed onerous, activity is likely to shift outside the regulatory perimeter. it may be possible to design policies which embed incentives to comply rather than evade, and smart supervision can help. but there could be occasions when tighter monetary policy is the only way to reach those parts of the financial system beyond the reach of regulation. in such cases, if other policies are not available, then “ leaning against the wind ” may be the only option left. as the simple analytical framework used earlier makes clear, tighter monetary policy reduces both aggregate demand and credit supply, while tighter regulatory policies do the same. but the empirical evidence suggests the impact of interest rates on credit is generally relatively weak, while capital and liquidity regulation have a very direct impact on leverage and maturity transformation and thus on the resilience of the financial system. so my sixth lesson is : both monetary and regulatory policies are required to maintain price and financial stability ; moreover, monetary policy should remain focused on the control of inflation, while regulatory policies should be assigned to maintaining financial stability. much is sometimes made of the risk of monetary and macroprudential policies pulling in opposite directions if they are assigned to different agencies. most of the time this should not bis central bankers ’ speeches happen, as both aggregate demand and credit market shocks will tend to push the two policies in the same direction. differential movements are more likely to arise in the face of supply disturbances. for instance, a beneficial supply shock will tend to push inflation below target, warranting a looser monetary policy, while it may also encourage a credit boom, warranting tighter macroprudential policies. but in any case, it is not clear that is such a problem. the instruments address different distortions, so one should expect them to move in different directions from time to time. moreover, it is likely that the regulatory dials will be adjusted much less frequently than policy rates, so co - ordination should not be that significant an issue7. my concluding observations relate to the broader context within which macroprudential policies are conducted. credit booms are times when everyone feels good and risks seem slight. taking the credit punch bowl away before the party gets out of hand will be controversial, and banks and borrowers will be quick to claim “ this time is different ”. that is a good reason for delegation to a separate committee or agency with a longer perspective, much as we do with monetary policy. even so, the pressures not to take action may be intense.

ravi menon : financial cooperation between china and singapore congratulatory remarks by mr ravi menon, managing director of the monetary authority of singapore, at the inauguration of icbc singapore rmb clearing bank, singapore, 2 april 2013. * * * mr jiang jianqing, icbc chairman, mr dai bing, distinguished guests, ladies and gentlemen, good morning. 1. i am happy to join you at this morning ’ s ceremony inaugurating the industrial & commercial bank of china as the renminbi clearing bank in singapore. 2. today ’ s event marks a key milestone in the financial cooperation between china and singapore. it is the fruit of a strong and substantive collaboration between the monetary authority of singapore and the people ’ s bank of china. • mas extended qualifying full bank ( qfb ) privileges to icbc and bank of china in october 2012 as part of the china - singapore free trade agreement. • pbc then named icbc singapore as the rmb clearing bank in singapore. • last month, mas and pbc doubled the size of their bilateral currency swap facility from rmb150 billion to rmb300 billion. the scope of the swap facility was expanded to allow mas to provide rmb liquidity to banks in singapore. 3. singapore is the first regional financial centre outside greater china to have a rmb clearing bank. offshore rmb activities in singapore will be underpinned by the strong and growing trade flows between the region and china. • singapore ’ s bilateral trade with china exceeds us $ 80 billion. • trade between asean and china is at a record us $ 400 billion. • this large and growing cross border trade will fuel greater rmb trade settlement activity in singapore over time. the rmb clearing bank will be an important channel for rmb liquidity to circulate between singapore and china. 4. singapore ’ s deep and liquid capital markets will be able to support rmb financing needs in the region. we have already seen companies here issuing rmb - denominated bonds. the singapore exchange has announced that it is ready to quote, trade, clear and settle rmb - denominated securities. we can expect the range of rmb - denominated product offerings to expand, as regional corporates raise rmb financing through bond issuances and equity listings, to tap on the strong investor base in the region. 5. there will also be strong and growing demand for rmb trade services. there is a critical mass of