clear that monetary policy can fill all the cracks. monetary policy flows into all the cracks no doubt, but some cracks are just too big to fill. 28 financial vulnerabilities are not evenly spread across the economy. they tend to be concentrated in specific sectors and segments, such as in real estate. so, even when monetary policy has configured overall liquidity and risk - taking settings appropriately, specific pockets of financial market vulnerabilities, e. g. a property bubble, could remain. 29 monetary policy is too blunt an instrument for addressing such specific risks to financial stability, and it can cause significant collateral damage on the rest of the economy if it tries to do so. bis central bankers ’ speeches • during a property boom, compared to interest rates, expectations of price appreciation may have a greater influence on current prices. • kenneth kuttner and illhyock shim estimate that a 100 basis point increase in the short - term interest rate would lower real annualised credit growth by less than 1 percentage point in the following quarter. such a rate hike will also reduce real housing price growth by only 1 percentage point. • using monetary policy to prick a property bubble may therefore require very sharp increases in interest rates to be effective. but this may have unintended spillovers on other parts of the economy. macroprudential policy : targeting the cracks 30 this brings us to the third approach to securing financial stability : using macroprudential policy, while monetary policy continues to focus on price and output stability. macro - prudential policies can be more effective for “ targeting the cracks ” where specific vulnerabilities are concentrated. 31 but what exactly are macroprudential policies? given its recent rise to prominence, it is still a nebulous concept with differing definitions. let me offer my thoughts on what macroprudential policy is and what it is not, from the perspective of singapore, which has been an early experimenter and practitioner in this area. 32 first, it is closely related to yet distinct from microprudential policy. some have called macroprudential policy “ old wine in new bottles ”. yes and no. many of the tools are indeed the same as the microprudential limits familiar to regulators : loan - to - value ratios, debt - toincome ratios, debt service ratios, and so on. 33 but there are some key differences. when these prudential limits are used for macroprudential purposes,

2011. we are the leading insurance centre in asia. • singapore plays host to about 190 insurance institutions meeting the protection needs of the economy and society across the region. • the industry has built up expertise in complex and specialist risks – including marine, energy, aviation and credit and political risks. we have one of the most developed bond markets in asia. • singapore ’ s total market capitalisation has grown by over 150 % in the last decade, to 270 billion us dollars in 2011. we are the fourth largest foreign exchange trading centre in the world. • fx and fx derivatives turnover in singapore has more than tripled in the last decade, with an average daily traded volume of about 360 billion us dollars. we are asia ’ s leading commodity derivatives trading hub. • most of the major global banks have their regional hubs in singapore. • according to some estimates, singapore accounts for more than half of asia ’ s otc commodity derivatives trades. to succeed in the new financial landscape, singapore must comprehensively support asia ’ s long - term financing needs. let me highlight two strategic areas where we will harness our diverse financial ecosystem : debt capital market and infrastructure financing. debt capital market in a world of deleveraging and higher regulatory constraints on banks, it is now more urgent than ever to develop strong capital markets to complement bank lending and help to provide a better match for longer term funding requirements. bis central bankers ’ speeches the fundamentals for a strong debt capital market are in place. • the singapore bond market is fully accessible to all issuers and investors globally with no capital controls, hedging restrictions, or withholding taxes. • there is diversity of issuers – financial institutions, corporations and government agencies. • there is variety in instruments issued, including structured and securitised debt. last year, i announced three initiatives to further improve the efficiency and liquidity of the singapore dollar bond markets. we have made good progress since. the provision of swap liquidity to primary dealer banks handling singapore dollar debt issuance for corporations is fully operational. mas is now able to support swap transactions at market - determined rates. the singapore dollar corporate bond securities lending facility will become operational by june this year. the facility will provide market makers an avenue to borrow securities and make prices more freely. the price discovery initiative to provide end - of - day prices for singapore dollar corporate bonds was completed in june last year. this price transparency has already spurred industry - led efforts to create a singapore dollar corporate bond index