lee hsien loong : credibility, confidence, dynamism : mas in the new economic and financial landscape address by mr lee hsien loong, deputy prime minister of singapore and chairman of the monetary authority of singapore, at the mas 30th anniversary conference, singapore, 20 july 2001. * * * introduction it is a great pleasure for me to welcome you to mas ’ 30th anniversary conference. we are honoured to have with us so many distinguished central bankers, financial supervisors, market participants and economists. a new economic and financial landscape is emerging. financial markets are becoming globalised ; cross - border capital flows are larger and faster ; financial institutions are consolidating and restructuring on a massive scale ; and new and complex financial products are emerging, driven by technology and market pressures. amidst these upheavals, mas ’ goals as a central bank remain unchanged : low inflation for sustained economic growth, and a sound financial sector for markets to grow and thrive. mas is a unique organisation – it is the only institution in the world that combines responsibility for monetary policy with supervisory oversight of the entire financial sector – banking, insurance and securities. in addition, it has the task of promoting the development of singapore as an international financial centre. i shall describe how mas has met its responsibilities in these three areas over the past 30 years, some of the key events that have shaped our policies, and how we intend to move forward in the new economic and financial landscape. building confidence and credibility monetary policy mas was born in turbulent times. it was 1971. the us dollar was under intense pressure, due to mounting inflation and balance of payments problems brought on by the vietnam war and great society programmes. in august 1971, just months after mas was formed, the us suspended convertibility of the us dollar into gold, plunging international currency markets into turmoil. in june 1973, the bretton woods system of fixed exchange rates finally collapsed, and the singapore dollar was floated. having witnessed these tumultuous events and the instability they caused, the singapore government enshrined a strong and credible currency as one of the key pillars of macroeconomic policy, and charged mas with the responsibility of ensuring it. tight fiscal discipline, a healthy balance of payments, and a vibrant singapore economy underpinned the steady strengthening of the singapore dollar. a second defining moment in the evolution of mas ’ monetary policy came in 1981 when global inflation accelerated in the wake of the second oil shock. dr goh keng swee, who took

of macroprudential measures to tame excesses in the housing market. while we do not as yet have a completely coherent policy framework, the main outlines of singapore ’ s approach are becoming clearer. it includes a suite of tools ranging from prudential instruments like loan - tovalue ratios and fiscal measures like stamp duties on property transactions, to supply - side and other administrative measures. singapore does not target asset prices but keeps a close watch on asset price movements, looking for signs of speculative froth, excessive leverage, or concentration risks. 19. systemic stability is also a shared responsibility. it requires coordinated efforts across different government regulators and agencies. mas is fortunate in this regard. as an integrated regulator which supervises the banking and insurance industries, as well as the capital markets, mas is well placed to take a comprehensive view of risks within the financial system as a whole. as a central bank responsible for macroeconomic stability, mas is also able to monitor and understand the effects of monetary and liquidity conditions on systemic risks. and mas works closely with other government entities on issues such as system - wide safety nets – such as the deposit guarantees of 2009 and 2010 – taking a comprehensive whole - of - government approach. reconciling international standards and domestic discretion 20. the third dimension of rebalancing in regulatory reforms is that between international standards and domestic discretion. we have known for some time that we live in a globalised, interconnected world. but we did not know the extent of our interconnectedness until the crisis hit home. cross - border bank lending is more than 40 per cent of world gdp. global finance is really a vast and complex network of connections. financial shocks are transmitted through this network with speed and virulence. regulators used to worry about institutions that were “ too big to fail ” ; now, they worry about institutions that are “ too connected to fail ”. size matters ; but connectivity matters more. 21. this high degree of interdependence means that governments in major economies can no longer act in isolation. regulatory policies must be globally consistent to minimise the risk of arbitrage. supervisory actions must be internationally coordinated to maximise their effectiveness. 22. yet, regulation and supervision is essentially a national prerogative, that must cater to the domestic context and circumstances to be effective. recognising this tension, international policymakers have focused on reaching consensus on international standards that serve as a minimum benchmark, while allowing countries the