the guarantee bolsters the confidence that the public has in singapore ’ s financial system. it provides certainty to singaporeans during such challenging and uncertain times in the international environment, notwithstanding that in singapore our institutions are fundamentally sound. third, financial services are an important pillar of singapore ’ s economy, accounting for 12 % of gdp and 5 % of singapore's employment. beyond this substantial direct contribution to gdp, the financial sector plays a critical role in intermediating credit for the economy, and in providing other critical financial services to companies and depositors in singapore. it is therefore important for the whole economy that the financial sector continues to function normally. should financial institutions in singapore become less competitive or credit become less readily available, it would hinder the financing of economic activities and raise the borrowing costs of businesses. this would aggravate the already challenging economic situation and thereby adversely affect our growth and jobs. fourth, this financial crisis is not confined to any country or region, but is a global one. singapore ’ s guarantee of deposits demonstrates our confidence in the soundness of our financial system, and helps contribute towards restoring confidence in the international financial system. why the guarantee is sufficient and prudent the deposits of individuals and non - bank customers with banks, finance companies and merchant banks in singapore amount to about s $ 700 billion. in view of mas ’ stringent regulations and close supervision of financial institutions in singapore, their strong capital and asset positions, and the potential support that foreign institutions in singapore can avail themselves of where necessary under the government guarantees provided by their home jurisdictions, mas and the ministry of finance have assessed that the backing of s $ 150 billion of the government ’ s reserves provided to the guarantee would be more than sufficient. let me explain. first, the likelihood of a bank failure as a result of problems in singapore is small as our banking system is sound and closely supervised, even though it is possible that problems elsewhere will affect a bank ’ s operations in singapore. second, even if a bank were to fail here, it should still have substantial assets to meet its liabilities to depositors. under the law non - bank depositors enjoy priority in being paid, ahead of other unsecured creditors. this makes it more likely that the failed institution will have sufficient assets to pay out to depositors. hence, for the guarantee to be called, two things have to happen : a bank has to fail, and at the same time its assets must be worth so little that

government at the time, melding them together in one organisation. they also set the foundations for an international financial centre. singapore was not a serious financial centre until then. mr hon sui sen and his team built the foundation for a financial centre that went beyond singapore. in mr hon ’ s words, said back in 1972 : bis central bankers ’ speeches “ in asia, singapore now offers the best prospects for developing into a financial centre, if not for the whole of asia, at least beyond the southeast asian or asean region. ” so it started then, and continued through the years when dr goh keng swee became chairman ( 1980 - 85 ). but the most important development in this second phase, starting when dr goh led the mas, was the re - orienting of our monetary policy to one centred on the s $ exchange rate. it was a novel policy at the time. we were one of the few central banks that managed monetary policy by focusing exclusively on the exchange rate. it was not conventional, but it has worked. through that second phase in mas ’ evolution, with dr goh as chairman and subsequently under dr richard hu ’ s chairmanship ( 1985 - 1997 ), we built credibility in our exchange ratecentred monetary policy. we also built credibility as a no - nonsense financial regulator. that was a very important second phase, in the 1980s and 1990s. the third phase began when pm lee hsien loong, then dpm, took over as chairman of mas ( 1997 – 2004 ), and continued through the years when esm goh was chairman ( 2004 – 2011 ). it involved liberalising and opening up our financial sector to greater competition, and at the same time developing further resilience in the system. this seemed a contradiction in terms to many countries – liberalising and opening up but at the same time developing resilience in the financial centre. but we have achieved both. we have managed the tension between liberalisation and developing resilience. i think we ’ ve managed it rather well. if you look at what happened during the asian financial crisis and subsequently, the global financial crisis, we have come out as one of the safest financial systems in the world. so that was an important third phase – liberalising and opening the financial centre but also developing further resilience. our credibility today rests on each of these three major phases in mas ’ development and policies – from the foundational years, to the period when we re