heng swee keat : financial developments in singapore opening remarks by mr heng swee keat, managing director of the monetary authority of singapore, at the press conference on the monetary authority of singapore ’ s annual report 2009 / 10, singapore, 29 july 2010. * * * strong recovery from the recession 1. the singapore economy has recovered strongly from the recession. five quarters since gdp reached a trough, singapore ’ s output has exceeded its pre - crisis peak by 13. 3 %. the rapid climb from the trough can be traced to several inter - related factors. in particular, the domestic economy had been lifted by the cyclical upturn in global trade and financial market conditions since early 2009, supported by inventory restocking and unprecedented policy stimuli in the major economies. given its openness and competitiveness, singapore was in an especially strong position to benefit from these global forces through our externally - oriented sectors. in addition, investments made in the earlier years were completed in time to tap onto the global upturn. these investments introduced new activities in singapore ’ s economic landscape, including high - end manufacturing and tourism services, and strengthened the competitiveness of our existing industries. 2. global markets also recovered strongly after march as the financial system stabilised and investor confidence recovered. taking into account translation effects stemming from the stronger singapore dollar, interest and dividend income, as well as gains in the valuation of assets, mas recorded a net profit of $ 10. 12 billion during the financial year. 3. looking forward, considerable risks remain in the global economy and the global financial system. singapore ’ s financial system has, by and large, weathered the crisis well. however, we must not be complacent and we need to prepare ourselves to respond to any future challenges. there are three areas which mas has been working on and which we will continue to focus on in the coming year : first, sustaining macroeconomic stability in the postcrisis period ; second, strengthening the financial system ; and third, maintaining the growth of singapore ’ s financial services sector. sustaining macroeconomic stability in the post - crisis period 4. the strong pace of growth seen in the first half of this year is not expected to be sustained. growth is likely to have peaked at the middle of this year, and will moderate to a more sustainable rate, as external demand slows after the post - crisis bounce from stimulus measures and inventory effects wane worldwide. for 2010 as a whole, the singapore economy

all of these tools in place, lvrs, dtis, interest rate floors, and enhanced prudential buffers, we would have a number of different ways of enhancing the resilience of the new zealand financial system to deal with different challenges as they appear. _ _ _ _ _ _ _ _ _ _ _ _ 11 on the prudential side, we are increasing the prudential buffers that banks are required to maintain. these prudential buffers will include a countercyclical capital buffer ( ccyb ). our approach to administering the ccyb is somewhat different to other countries, as we do not intend to be as active as other countries in adjusting it, as it will be fully incorporated in the capital requirements. this is consistent with our understanding that macroprudential policy tends to be less effective in managing the top and bottom of cycles but rather as through - the - cycle policy to add to overall resiliency. next steps looking ahead, there are two main next steps on our macroprudential agenda. consulting on additional tools to complete the suite we are currently consulting with banks and the general public on adding debt – to - income ( dti ) tools to our framework. some banks have expressed their preference for a floor on test interest rates instead of a dti. they have argued that an interest rate floor would be much easier for them to administer and it could, in the end, achieve similar results. while we have taken on their argument, a dti continues to be our preferred option. we feel that a dti produces a better control on the probability of default as a complement to the reduction in loss given default provided by existing lvr restrictions. by contrast, test interest rates are only one input into banks ’ serviceability assessments, and there is a risk that a test rate floor could be offset by adjustments to other elements of banks ’ calculations. however, an interim test rate floor could be put in place in the short term if necessary to address financial stability risks. we are currently looking for banks to be operationally ready to introduce a debt servicing tool by mid - 2023, if they are required12. enhancing our framework and communications for monetary policy, so - called ‘ neutral interest rates ’ provide a sense for whether the current settings for interest rates are expansionary or contractionary. in a world where macroprudential tools have turned out to be a more permanent feature of the landscape than we initially expected,