##thy, 2008 ). there was also a higher - order information problem arising out of the interconnected nature of the financial system. banks, when they appear at all in economic models, just exist to transfer funds from savers to borrowers and to monitor the latter. but the reality is a high degree of exposure of financial institutions to each other as a result of interbank loans, holdings of cdss written by other parties, holdings of securities issued by other parties, and so on. in normal times, one does not need to know much about a counterparties ’ risk exposure. but when there are doubts about solvency of a major institution, one needs to know not only one ’ s own exposure to that institution, but also about the exposure of one ’ s other counterparties. the collapse of lehman brothers was particularly critical in that, prior to that and particularly in the light of the rescue of bear stearns, such an institution was probably viewed as being too big and interconnected to fail. but the failure of the us authorities to put together a viable rescue plan, together with growing doubts about the likely effectiveness of the troubled as it turned out, those willing to carry the risk were not always those best placed to bear it. asset relief program ( see taylor, 2009 ), raised the possibility in investors ’ minds of the failure of a whole range of institutions that had previously been considered safe. that is evidenced in the simultaneous sharp spike upwards in the cds spreads of a number of financial institutions after the collapse of lehman ’ s ( see fig. 12 ). moreover, the prospect of having to make significant default pay outs called into question the solvency of a key provider of that insurance, aig. the bottom line of all this is that the information requirements for managing risk escalated rapidly at the same time as investors were waking up to the realisation that the distribution of prospective returns on a range of asset - backed securities was a great deal worse than they thought. not surprisingly, there was a rush for the exits and a drying up of wholesale funding to institutions that were thought to be at all vulnerable. moreover, attempts to cope with that by selling off assets ran into an adverse selection problem : if someone is selling an asset, then perhaps that indicates that they know it ’ s a “ lemon ”. and even the revelation of central bank support in its role as lender of last resort, far from solving the problem, could be interpreted as a negative signal about an institution, as was

can convert the quotation of their stocks into s $. ses will announce details for such conversion shortly. subsequent share issues by such companies will be subject to the same requirement, i. e. proceeds must be converted into foreign currency before being used outside singapore. this change is in line with the caveat emptor principle. singaporean investors considering buying shares in a foreign company not operating in singapore should learn for themselves what the company is doing, how successful it is likely to be, and what the risks are, before deciding whether or not to invest in the company. there is no need to deter them from investing in the company, by making the company list in a foreign currency. mas will be issuing a revised mas 757 shortly, incorporating these revisions. we hope the changes will increase international participation in our s $ capital markets and add to their depth and critical mass. mas will, of course, continue to review the notice on an ongoing basis, in line with market needs and financial innovation. year 2000 lastly, it being so close to the end of the year, let me make some remarks on y2k. singapore ’ s financial sector is fully ready for the new millennium. all banks and financial institutions have taken all necessary steps to achieve y2k readiness. they have tested all important internal systems and participated in extensive industry - wide tests, both within the financial sector and with critical infrastructure providers. mas has also established a y2k liquidity scheme for a two - month period, from 29 november 1999 till 28 january 2000, to help meet temporary y2k - related liquidity needs of banks and finance companies, in the unlikely event that they are unable to obtain funding in the market during the crossover. independent assessments by global industry bodies rate singapore among the countries best prepared for the date change. in the nature of the y2k problem and despite all best efforts, some glitches may still occur. we therefore have a range of contingency plans ready. mas and many financial institutions in singapore will set up command centres during the crossover to monitor closely all aspects of operations, and respond promptly to any problems that arise. singaporeans should rest assured that electronic services such as atms, electronic funds transfer and credit card facilities have been fully tested. all their financial records are backed up daily and are safe. they need not take any special measures in preparation for the new year, like withdrawing additional amounts of cash. their money in the banks will be as safe as