ravi menon : asia – no room for complacency keynote address by mr ravi menon, managing director of the monetary authority of singapore, at the paris europlace financial forum, singapore, 30 november 2011. * * * mr christian noyer, governor of banque de france, distinguished guests, ladies and gentlemen, good morning. for those of you who are coming from abroad, a warm welcome to singapore. deleveraging out of a debt overhang moliere, a french playwright considered to be one of the greatest masters of comedy, once offered this sobering thought : “ debts are like children ; begot with pleasure and brought forth in pain ”. today, the pain he described is palpitating throughout the world and keeping many leaders in government, business, and finance awake at night. the advanced economies are awash in debt. governments, households, and banks must reduce leverage to restore economic and financial sustainability. but history tells us that deleveraging, while necessary, leads to a prolonged period of slower growth punctuated by increased financial market volatility. the gross government debt - to - gdp ratio is 80 % in the uk and in the eurozone, 100 % in the united states, and 230 % in japan. sovereign debt in aggregate is today at levels not seen since the second world war. financial markets, which had hitherto tolerated the build - up in debt, have turned merciless against the eurozone economies, driving up sovereign spreads and dragging down the ratings of those who hold sovereign paper. european governments have begun to take steps towards fiscal consolidation, and must convince markets that these steps are credible. unfortunately, the private sector is not ready to take over the slack in public demand. private sector debt - to - gdp ratios exceed 250 % in the g3 economies. in the united states, where the household debt - to - disposable income ratio reached an unprecedented 135 % in 2008, deleveraging is already underway with the recovery in private consumption well below historical rebounds. while eurozone households are less leveraged than us households, disposable income is likely to grow more slowly in the eurozone and hence be a bigger drag on consumption. a third source of deleveraging is the banking system. banks in the eurozone have to strengthen their capital adequacy position to meet new regulatory requirements as well as buffer against potential losses on their sovereign debt holdings. with uncertain prospects for raising fresh capital in equity markets

the end of this year. our policy consultation will provide further details on how mandatory clearing will be implemented. third, move trading to platforms where appropriate. international discussions on implementation issues are still ongoing. mas is actively participating in these discussions. we will use the findings to help develop our own regulatory framework for organised platforms for trading. fourth, report trades. we are assessing the need for a local repository and the appropriate regulatory regime. our aim is a practical and efficient system that avoids duplication. on the insurance front, singapore was among the first in asia to introduce a risk - based capital framework back in 2005. unlike in banking, there is no common global capital standard for insurance companies. the closest is the eu ’ s new standard known as solvency ii which is expected to be implemented by 1 january 2013. many non - eu countries are looking to modernise their own capital frameworks along similar lines. to ensure that our risk - based capital framework in insurance keeps pace with these developments, mas will embark on a review of our framework. we expect to issue a consultation paper by the end of this year. in the post - crisis landscape, there is a premium placed on well - regulated financial centres that have strong economic fundamentals. singapore is in a good position to benefit from this. we have high prudential standards and rigorous supervision that give market players confidence. and we are at the crossroads of asia, which is growing significantly faster than the western economies. 2010 was a good year for singapore ’ s financial centre. the financial services sector grew by 12 % last year. several specific factors in asia underpin the demand for financial services provided by singapore : increase in trade, demand for infrastructure investments, rise of asian corporates, and growth of individual wealth. as a well regulated and diversified international financial centre, singapore plays a natural role in facilitating trade and bis central bankers ’ speeches investments in the region. high regulatory standards and a conducive business environment will continue to support stable growth in financial services. conclusion before i conclude, i want to highlight one more significant theme. this year marks mas ’ 40th anniversary. mas is where it is today because of the outstanding contributions of its staff – both past and present. the economic and financial stability that singapore has enjoyed is the result of tireless efforts of generations of mas officers. they have helped to secure for singaporeans a low rate of inflation, preserve the purchasing power of our official foreign reserves, keep our financial sector safe and sound amidst crisis