lee hsien loong : building one financial world address by mr lee hsien loong, deputy prime minister of singapore and chairman of the monetary authority of singapore, at the 42nd aci world congress, held in singapore on 25 may 2001. * * * managing financial integration : asia ’ s experience the last 25 years has seen the emergence of an increasingly borderless, integrated financial world. the collapse of the bretton woods system set in train the deregulation of domestic financial markets and the removal of barriers to cross - border finance. overall, the outcome has been positive. globalised financial markets have helped to integrate national economies into a global trading system, and finance growth through better allocation of world savings. but the benefits have not come without hazards. shocks are now transmitted quickly from one financial system to another. large speculative flows threaten to destabilise economies from time to time. the margin for policy error is narrow, and the penalty severe. one consequence of greater financial integration is that countries can no longer count on sound macroeconomic fundamentals alone to attract foreign capital. when deciding whether to lend or invest and at what price, international players increasingly look to the stability of countries'financial systems, the degree of transparency, the quality of the legal framework and the standards of corporate governance. on these counts, asia has much catching up to do. for too long, east asian countries directed their domestic banks to lend to well - connected familybased firms and conglomerates. even when the countries deregulated financial systems and freed their capital accounts, they did too little to strengthen financial supervision and regulation, develop liquid markets, and promote sound corporate governance. international creditors were eager to participate in the asian miracle, and accepted a close nexus between borrowers and lenders as the " way " business was done in asia. but lending on the basis of familiarity and relationships is prone to abuse and a recipe for financial mishaps. the asian crisis of 1997 / 98 vividly brought home the risks of this approach. the asian crisis is now past, but we are not back to the status quo ante. the situation today is troubled, but it is different from that in 1997 / 98. unlike then, there is no contagious financial panic, no more hot money to flee the region, crashing currencies and economies one after the other. the markets are more subdued, although they are not immune to shocks, especially from political developments. global investors and traders have been chastened

, we are stepping up consolidated supervision of financial groups. in banking, mas has always conducted group wide supervision. we are increasingly focusing on areas such as mitigating intra - group contagion risk, preventing the multiple use of capital within the group, and limiting group concentration risk exposures. for insurance groups, we will be enhancing our supervisory practices. we issued a consultation paper in february this year, with detailed proposals. we will also introduce a new financial holding companies act. this will cover companies incorporated in singapore, which hold as their subsidiary or subsidiaries, banks, insurance companies, or both, but does not itself conduct banking or insurance business. third, regulation of the fund management industry. all fund management companies will have to meet the enhanced competency, business conduct, and capital requirements by august. those with assets under management greater than s $ 250m will have to be licensed, while those below this threshold may operate under the “ registered fund management company ’ regime, which will replace the existing “ exempt fund manager ” regime. i will now touch on the performance and development of singapore as a financial centre. financial centre : well - positioned for growth singapore financial sector activity subdued in weak global environment, but longer - term prospects remain bright singapore ’ s financial sector contracted on a sequential basis for two consecutive quarters in q4 2011 and q1 2012, amidst heightened risk aversion in global financial markets. we expect financial services activity to remain subdued given uncertainty and weakness in the global economic environment. activities such as trading – which are very sensitive to sentiment – bore the brunt of adjustment. but other activities – tied to asian demand – have remained resilient. they are well - positioned for growth. asia ’ s demand for financial services will continue to be driven by rapid urbanisation, the demographics of a growing middle - class, and the rise of regional multinational companies in need of funding. let me highlight a few of these growth areas. first, asset management. as at end - 2011, total assets managed by singapore - based asset managers amounted to s $ 1. 34 trillion. this is a slight dip of 1. 2 % from 2010, but not bad, considering the weak performance of global equity market and the volatile financial markets in general. indeed, we have seen a more diversified base of asset managers offering a greater variety of investment strategies. the number of investment professionals increased by 15 % last year. and we continue to see strong interest from global fund houses seeking to set up or