implemented this framework in january 2015 with a one year transition period for the industry to be familiar with the framework before the requirements are legislated in january 2016. 13. while many financial advisors do their work professionally, it is also a reality that compensation system can shape sales behaviours, and sales - based remuneration models may not always align the interests of financial advisers with the consumers. 14. under the bsc framework, a major proportion of a representative ’ s remuneration will be based on whether the representative has acted professionally such as consumer needs analyses, recommendation of suitable products, and adequate disclosures. this bsc initiative will help to align the interests of financial advisers with their customers. over the longer term, the bsc framework will boost consumer confidence in the professionalism of the financial advisory industry. strengthening the resilience of the life insurance industry : rbc2 15. let me now turn to the new risk - based capital framework or rbc2. why the move from rbc to rbc2? 16. insurance regulators around the world are adopting risk - based capital and singapore has been a frontrunner with our current insurance risk - based capital ( rbc ) framework introduced in 2004. this risk framework has served us well, and our insurers have navigated largely unscathed through recent financial crises ; while the framework allowed for regulatory bis central bankers ’ speeches intervention in a timely and effective manner. now, i know this begs the question – if it isn ’ t broken, why fix it? 17. the answer is that the operating environment for global finance including insurance, has and will become increasingly complex given the more connected global markets, the vulnerability of contagion, an overall low interest rate environment that pushes investors including insurers to target more risky higher - yielding products and potential new risk areas such as in some emerging markets or in technology risks. 18. it is important that our insurance capital framework remains relevant and effective and that insurers operating in singapore are well - capitalised to weather different crises and risk forms. 19. at the global level, the international association of insurance supervisors ( iais ) has also embarked on the development of capital standards for internationally active insurance groups ( “ iaigs ” ) ; while the international accounting standards board is expected to finalise its guidance on insurance contracts under ifrs4 sometime this year. progress on rbc2 20. last year, mas published our second consultation paper, which outlined our key proposals for rbc

to a substantial accumulation of ofr, well in excess of what was required for mas ’ central banking operations. so, in 1981, the gic was set up – in today ’ s parlance, a sovereign wealth fund – to manage part of the reserves for higher returns without the central bank constraints of liquidity. part of the ofr was transferred from mas to gic, which was tasked to invest the reserves in a globally diversified portfolio of asset classes with a higher risk profile to deliver good long - term returns. the third pot of reserves is managed by temasek holdings, an investment company wholly owned by the government. 3 / 7 bis central bankers'speeches temasek ’ s history also dates back to the early years of singapore ’ s development. there was little private capital in those days but a rapidly industrialising economy needed key infrastructure – in aviation, in shipping, in telecommunications, in banking, and so on. the government therefore set up enterprises in these areas. temasek was formed as a holding company in 1974 for these enterprises so that the government could focus on its roles of policy making and regulation without conflict, while temasek would own and manage these investments on a commercial basis. today, temasek is an active, equity investor that aims to deliver sustainable long - term shareholder value. more than a quarter of temasek ’ s portfolio is invested in singapore, with the rest invested in asia and global markets. the initial portfolio was provided by the government, but since then, temasek ’ s funds have come mainly from the investment growth of its own portfolio. compared to mas and gic, temasek is further out on the risk - return spectrum. how are the ofr managed? let me now move to the third question : how are the ofr managed? this is the portion of the reserves that mas is responsible for. there are three prongs to mas ’ approach to managing the ofr robust risk management ; balanced asset allocation ; and efficient investment process robust risk management the starting point to mas ’ approach to managing the ofr is its risk management framework, which sets out the liquidity and risk tolerance levels of the ofr. these relate to : the ability of the portfolio to meet liquidity needs under stress conditions ; and the maximum loss of the portfolio under tail risk scenarios. these liquidity and risk tolerance levels are determined on the basis of what is minimally required to meet the objectives of the ofr in supporting