industry. • about 60 % of the surveyed banks ’ o & g exposures are to the more resilient downstream, oil trading, and integrated firms, which are less impacted by the decline in oil prices. • firms focusing on oil refining have also fared better on account of regional demand for refined petroleum products and lower feedstock prices. the most recent stress tests conducted by the mas indicates that the banking system would not do too badly even under some pretty severe scenarios. the stress scenario assumed : • the us, eu, japan and several emerging asian economies slipping into recession and china ’ s economic growth falling below 3 % ; • sharp depreciation in regional currencies and oil and commodity prices falling by another 50 % over 3 years ; • a protracted recession in singapore with resident unemployment spiking to more than 6 % ; bis central bankers ’ speeches • property prices falling by another 50 % over 3 years, with similar declines in china and hong kong ; and • the banks ’ top o & g counterparties failing. under these rather dire conditions, the banks ’ npl ratios could rise to 8 – 10 % by the end of 2018. that should not be surprising. what ’ s important is that the banking system will be able to absorb these losses. • banks will continue to meet the basel minimum capital requirements comfortably. • and they will have sufficient liquidity to meet their cash flows. this resilience did not come about by accident. it reflects prudence and sound financial management in the financial industry : • building up capital and liquidity buffers ; • identifying and managing risks proactively ; • provisioning against losses conservatively. a dynamic financial centre i have talked about imagining the worst and preparing for it – that is resilience. let me now talk about seizing opportunities – that requires dynamism. our financial sector has been able to grow handsomely because it is plugged into the region – which is growing two to three times faster than our own economy. • but the continued growth of the financial sector is not a given. • mas and the financial industry have been working hard together to realise this potential. a key priority is to strengthen infrastructure. let me give an example. emerging asia has enormous infrastructure needs. at the same time, global investors are seeking investment projects with good, long - term yields. there ought to be a good match. yet, for all the promise and rhetoric, infrastructure finance has not really taken off. • the basic

place robust monitoring mechanisms to detect suspicious activities ; • promote strong risk awareness and constant vigilance among all staff ; and • empower their compliance and risk management people. my advice to senior managers in our financial institutions is this : keep your risk and compliance people close to you. • they are often seen as hindering opportunity and profits. • but when things go wrong, you wish you had heeded them. • when they say ‘ i think something ’ s not right here ’, listen to them. ultimately, trust and conduct boil down to culture more than any externally imposed rules. by culture, i mean the shared values, attitudes and norms that guide behaviour. financial institutions must get the culture right. this requires setting the right moral tone from the top. • boards and senior management in particular must send a clear signal that profits do not come before values and ethics. • compensation structures must motivate not just high performance but also right conduct. bis central bankers ’ speeches conclusion good fortune has played a role in the growth of singapore ’ s financial sector. • our financial centre has benefited from connecting one of the fastest growing regions in the world with global markets. but fortune can be fickle and economic cycles will turn. to stay relevant and thrive as a financial centre requires us : • to remain resilient through good times and bad ; • to be dynamic in serving the changing needs of the region ; and at all times • to be trusted as a clean and credible place to do business in. mas is committed to working with the industry and all our stakeholders – including an inquisitive and fair media – to ensure that. thank you. bis central bankers ’ speeches