1 Transferring this additional duration risk to the Federal Reserve’s portfolio, and hence out of the portfolios of market participants, was one channel through which the asset purchase program was intended to have its effect on financial conditions. This “portfolio balance” channel has been discussed by Chairman Bernanke on several occasions. 2 This view associates the amount of policy stimulus with the stock of assets, or more precisely with the amount of duration risk, that the Federal Reserve takes onto its balance sheet. Policy achievements of LSAP2 The purpose of the asset purchase program was to help the Federal Reserve achieve the economic objectives of full employment and stable prices that it was given by Congress. I believe that the program delivered what could have been expected from it. In particular, let me highlight its success along two dimensions. First, the LSAP2 program made broad financial conditions more accommodative. This conclusion can be drawn from the behavior of financial markets from late August 2010 to the program’s implementation date in November 2010 – a period during which market participants moved from seeing such a program as a remote possibility to expecting it with near certainty. 3 Asset price movements over this period included a decline in real interest rates, a narrowing of risks spreads, an increase in equity prices, and a decline in the dollar – exactly the pattern that one would expect to be generated from additional monetary policy accommodation.
We have also abolished the foreign shareholding limit on local insurers to make way for strategic mergers and alliances with reputable international players. Earlier this month, MAS announced plans to introduce a new modular licensing framework for market intermediaries in the securities and futures industries. In addition, MAS will streamline the regulation of financial advisers and require them to comply with standards of market conduct and practices. MAS is also stepping up its review of the policy issues of the securities and futures legislation, to consolidate and streamline the requirements into a proposed Omnibus Securities and Futures Act. In the coming year, the key priority for the MAS is to follow through the reforms that have been introduced over the past year, and ensure that the implementation is carried out effectively. MAS will continue to review and refine our legislation and regulatory framework to keep pace with global developments. The challenge for us is to sustain the momentum and persevere in our efforts to build Singapore into a world-class financial centre. BIS Review 62/2000  2  International relations Let me now turn to MAS’ efforts in the international fora. With the recovery in crisis-affected economies, the focus has shifted from crisis management to ensuring the sustainability of the recovery and reform of the international financial architecture. Singapore has participated actively in the Financial Stability Forum, established over a year ago to monitor international financial market developments for potential vulnerabilities.