without its downside. if its coverage is too broad, or it insures too large a proportion of deposits, it can cause the same problems as a government guarantee. a poorly designed deposit insurance scheme may make the banking system less rather than more stable. these problems can be mitigated if the deposit insurance scheme only insures small deposits, or sets premiums in line with the relative riskiness of banks, or discriminates between banks and subsidiaries that are incorporated here from those that are not. these are complex issues that need careful study, which mas has begun. conclusion this liberalisation package will provide further impetus for upgrading and progress in the local banks and singapore's financial sector development. we will review the progress made in another 2 - 3 years, before deciding on further moves. consolidation and continued liberalisation are important in building strong banks. but they are not in themselves sufficient. banks must press on to upgrade their capabilities. they must keep abreast of international best practices, new products, technological developments and new ways of doing things, while retaining the support and confidence of consumers. abs can play a part to help the banks do this. the government will do its best to maintain a sound regulatory framework, conducive to competition and innovation. but finally, success will depend on the quality and passion of the people in the financial industry. together we have to build the skills, develop the businesses, and enhance the regulatory framework to make singapore the premier financial centre in asia.

lee hsien loong : consolidation and liberalisation : building world - class banks speech by mr lee hsien loong, deputy prime minister of singapore and chairman of the monetary authority of singapore, at the association of banks annual dinner, singapore, 29 june 2001. * * * introduction two years ago, mas embarked on the first phase of a programme to liberalise the banking industry. the aim was to strengthen our local banks through competition, provide singaporeans with quality banking services, and enhance singapore's position as an international financial centre. we phased in the liberalisation measures progressively, to give local banks time to upgrade themselves to meet the competition, and maintain the stability of the financial system. the first package of measures in 1999 comprised a few main elements. mas permitted 4 qualifying full banks ( qfbs ) to establish up to 10 locations each, relocate their existing branches and share atms among themselves. we granted 8 new restricted bank licences to banks that wanted to expand their wholesale s $ business. we also gave offshore banks more flexibility to lend in singapore dollars and engage in s $ swaps, and even wider leeway to 8 qualifying offshore banks. these measures marked the start of a major and irreversible process of change. we could not foresee exactly how the industry would respond and develop. so mas committed to reviewing progress at the half - way mark before deciding on further liberalisation measures. we have now completed this review. local banks'upgrading and consolidation since the first liberalisation package was announced, the local banks have made progress in building up their capabilities. they have generally strengthened their management teams, and invested heavily in infrastructure to provide banking services more efficiently, especially via electronic channels. they have improved their customer relationship management systems, which will allow more effective data mining of their customer databases and cross - selling of multi - sector products. local banks have also been seeking opportunities and expanding their presence in the region. an important and more visible sign that local banks are gearing up for competition is of course the process of consolidation that is underway. the opening gambit was made on 12 june when ocbc announced that it was making a voluntary general offer for keppel capital holdings which owns keppel tatlee bank. ten days later, dbs made an unsolicited bid for oub. and just three hours ago, uob made a competing bid after reaching agreement with the controlling shareholders of oub. all the local banks are now busy reassessing