ravi menon : securing price stability as singapore restructures speech by mr ravi menon, managing director of the monetary authority of singapore, at the asian bureau of financial and economics research ( abfer ) opening gala dinner, singapore, 21 may 2013. * * * professor bernard yeung, dean, nus business school, whose tireless efforts have brought to fruition the asian bureau of financial and economics research, distinguished guests, ladies and gentlemen, good evening. interesting times again monetary policy has become interesting again. the great moderation, beginning in the mid - 1980s and spanning two decades, marked the triumph of monetary policy over the scourge of inflation. the formula worked brilliantly – independent central banks, with clear mandates to pursue price stability, and doing so with consistency and credibility, ushered in an era of macroeconomic and financial stability supporting steady economic growth and rising prosperity. then came 2008 / 2009 – unleashing a financial crisis of unmatched scale and impact, and a global recession deeper than any seen since the great depression. we are still living in the shadows of these two shocks, with the global economy stuck in a hesitant and uneven recovery and financial market stresses resurfacing from time to time. monetary policy in the advanced economies has entered unchartered waters, in a valiant effort to support economic growth, which was being weighed down by deleveraging. in the emerging economies, central banks and governments have had to be equally nimble in their policy responses, as they grapple with the spillover effects of these unconventional monetary policies. singapore has not been spared the effects of these broader global developments. our exchange rate - centred monetary policy has been remarkably successful over the decades, in securing price stability amidst rapid economic growth and an open trade and capital account. consumer price inflation has averaged 1. 3 % per annum during 1985 – 2005, one of the lowest in the world. inflation surged briefly in 2008, moderated in the wake of the global financial crisis, but resumed an upward creep from 2010 onwards. consumer price inflation averaged 4. 2 % during 2010 – 2012, the longest period of sustained inflation above 4 % in singapore ’ s history. it is particularly challenging that the current bout of inflation is occurring against the backdrop of a slowing economy, weighed down by weak external demand and a tight domestic labour market. and in a world awash with liquidity searching for both yield and safety, singapore has been at the receiving end of such flows. tonight, i

##security. today the focus is on financial market infrastructure. one of the questions being asked in this section of the conference is, “ what challenges are likely to emerge with new operating models and new actors in the financial sector? ” as i said before, the fintech snowstorm is already here. the newest challenge with respect to cybersecurity is the emergence of new players offering financial services, some of whom have not provided financial services before. the question therefore becomes : what technology are they using? is it established, or is it new and unknown technology? we also know that attitudes towards security and operational risk are important. but with tech firms rushing to offer new products to the market, there is the risk of insufficient emphasis on security. this is a risk that must be monitored – not only for new products or for new players, but also for incumbent businesses. tech giants like google, apple, and alibaba look set to become dominant players. their advantage comes from providing cross - border services and having already gathered significant information about users. they are already present in the nordic marketplace. this development may lean towards monopolies, as it can create entry barriers for new and smaller players in the market. if that proves to be the case, it could have a negative impact on competition and go against the aims of the psd2 ( the recent eu directive on payment services in the internal market ( 2015 / 2366 ). this risk is greater when the payment mechanisms are outside the jurisdiction of the relevant state. then there is the question of supervision. will the new solutions be supervised, and if so, how? the challenge here is that many new solutions are global, and thus outside the european economic area or the european single market. such supervision thus requires crossborder cooperation among supervisors. the challenge for the supervisor is also to maintain a comprehensive overview of the market. for the legislator, it is a challenge to stay on top of rapid technological developments, as rules tend to lag behind technological changes. financial market participants must commit fully to guarding the system. cybersecurity needs to be promoted at all levels. with respect to this fast - changing technology, keeping one step ahead of antisocial elements is a constant challenge. as i see it, cooperation is the only way forward. it is vital that all financial system entities work together on all fronts – within and between countries – to identify and address vulnerabilities. we need to share both our successes and our