tharman shanmugaratnam : key issues in asian financial markets keynote address by mr tharman shanmugaratnam, chairman of the monetary authority of singapore, at the aci ( the financial markets association ) 52nd world congress, singapore, 15 march 2013. * * * mr. manfred wiebogen, aci global president distinguished guests, ladies and gentlemen 1. i am delighted to be here today with all of you. 2. the last time singapore hosted the aci congress was back in 2001. in fact, it was just before 9 / 11. the world was in a very different place. asia too was so different from today. the wounds of the asian crisis of the late 90s were still fresh. investor confidence in the various countries in the region was uneven. and asian capital markets were by and large in their infancy. the new financial landscape 3. we are now in a new phase in global finance. global finance is deleveraging, after the great credit bubble that began more than a decade ago and came to an end in 2007. but deleveraging still has some way to go, and some years to go, before the overall level of leverage relative to economic activity gets back to a sustainable level. 4. the pace of deleveraging has been moderated so far by central banks, who have taken onto their balance sheets unprecedented levels of both public and private sector debt. their actions have reduced the risks of catastrophe. but it also means we have a long way yet to go in reducing debts and returning to sustainable growth. 5. we are also seeing important shifts in the structure of global finance, besides the gradual contraction in global liquidity. it is too early to say where we will be five years from now, but some of the broad brush - strokes in this new landscape of global finance are already with us and likely to stay : • the return on equity in global banking has fallen, and will not return to pre - crisis levels, given stricter capital and liquidity rules. • deposits have become more important as a source of bank funding. • banks in certain major jurisdictions have retreated from global markets, and worryingly, and may stay in retreat for some time. • the securitised debt markets should recover, but with less leverage underpinning them, and hopefully greater risk transparency. • in the derivative markets, there will be greater standardisation of products, and much greater reliance on common market infrastructure – for trading, clearing and reporting

the comprehensive suite of financial services that we offer to global investors and borrowers. shariah - compliant financial instruments allow issuers to tap a new source of funds and liquidity. but the development of an islamic financial services market does not just serve indigenous muslim populations. malaysia, for instance, has successfully launched global sukuk, or islamic bonds, to tap liquidity from investors in both asia and the middle east. other issuers of global sukuks have also stopped by singapore on their road shows to tap singapore ’ s investor pool. it may not be too long before we have a singapore corporate issuing a sukuk to raise funds from global investors. we are also seeing already private fund managers in asia and the middle east working together. recently, for instance, ara asset management based in singapore had worked in partnership with dubai islamic bank to launch a us $ 450 million islamic far eastern real estate fund with underlying assets located in asia. fourth and finally, we can do more to foster people - to - people interaction in the financial sector. for instance, asian central banks including the monetary authority of singapore have participated actively in middle east finance and central banking seminars to share our perspectives on issues of mutual interest. tomorrow there will be a seminar organised jointly by the islamic financial services board and islamic development bank tomorrow in kuala lumpur on developing a 10 - year master plan for the islamic financial services industry globally. in singapore, the mas conducts courses in banking supervision and capital markets which we have extended invitations to both our asian and middle eastern counterparts to participate in. we must think of many other platforms and vehicles which could facilitate people - to - people interactions, including those involving think - tanks, universities, training institutes, and private sector financial bodies like the association of banks for example. there is also a financial stability dimension to these networks. as cross - border financial transactions increase, effective supervision will require countries to foster greater cooperation with their regulatory counterparts. the monetary authority of singapore, for example, is in discussions to conclude mous with the uae ’ s emirates securities and commodities authority and qatar ’ s financial centre regulatory authority to provide for training and supervisory cooperation. i have highlighted earlier that investment agencies in our two regions are now managing sizeable foreign reserves. there is much scope for our investment agencies to touch base with each other, exchange knowledge of global markets, share the latest in reserve management techniques, and help each other navigate in one another ’ s regional hinterlands where appropriate. we could even co