Sub-Prime Woes Won't Deter S'pore: SM

Source : The Business Times, November 2, 2007

Financial sector devt will continue here; Asia must press on

Singapore is not going to be deterred by the US sub-prime mortgage meltdown and will press on with developing its financial sector, Senior Minister Goh Chok Tong said yesterday.

Asia was relatively untouched by the sub-prime crisis because it has yet to move into sophisticated structured credit financing in a big way, said Mr Goh, who is also chairman of the Monetary Authority of Singapore (MAS).

'However, I believe that Asia should press on with its efforts to develop its capital markets in order to complement the banking system and improve the robustness and efficiency of its financial system.'

Speaking at British banking group Barclays' Asia Forum here, he said Singapore will not relent in its efforts to develop its financial sector.

The island is already a key centre for asset management and trading of financial products like foreign exchange and derivatives, he said. And it is making good progress as a regional centre for innovative equity products, business trusts, exchange-traded funds and project finance.

'We envision Singapore as a centre of excellence for financial training, education and research,' Mr Goh said. 'Hence we are deepening specialists' capabilities in fields such as risk management, financial engineering and actuarial science.'

But market players and regulators must refine their understanding of risk as more sophisticated products are introduced. They should be familiar especially with how shocks can be transmitted through these products, he said.

'We must then develop tools to manage such risks. Much of the recent financial dislocation stemmed from opacity in the distribution and pricing of risks for derivative products.

'The key lessons include the need to monitor off-balance-sheet exposure and institute better management and supervision of liquidity risks.'

SM Goh acknowledged that these are tough issues to tackle because they have to be dealt with without imposing excessive regulatory burdens on market players or stifling financial innovation.

The sub-prime crisis has brought home the reality of growing inter-dependence, he said. Central banks, financial regulators and guardians of the public purse must work in close coordination. 'They must also work with key counterparts in other jurisdictions.'

Another key issue that requires special attention is the setting up of crisis management and resolution frameworks to lessen systemic fallout when financial institutions run into trouble, Mr Goh said.