Among other things, the increased focus in the New Accord on internal ratings and risk-adjusted pricing might encourage a more sensible approach to the setting of margins on syndicated loans. I know that many banks in Hong Kong think that margins are now too low to fully compensate for expected loss, the cost of capital and operational costs. However, more rational pricing policies are currently hindered by the lack of consistency among banks on how they price risk and allocate capital. The New Accord should go some way to correct this. Under the internal ratings based (IRB) approach, banks will be required to use internal ratings as a factor in the pricing of credit risk. Progress on the New Accord As part of the process of creating incentives for better risk management, the Basel Committee is now engaged in a more general effort to recalibrate the New Accord to adjust the amount of capital charge under each of the main approaches. The aim of the revised set of proposals is that, on average, the total amount of capital required under the standardised approach to cover both credit and operational risk should be the same as that required under the current Accord to cover credit risk only. Modest capital relief would be available to those banks that move to the foundation IRB approach, with still more relief for those which opt for the advanced IRB approach. These, and other revised proposals of the Basel Committee, seem to have got the New Accord back on track.
exchange rate fluctuations between $ and major currencies. •  When $ appreciates against major currencies, there is translation loss when assets are reported in $  •  Likewise, when $ depreciates, there is translation gain  •  But these gains and losses mean little for international purchasing power of our OFR which is denominated in foreign currencies. 32. Focusing on overall profit figure therefore misses larger point about MAS’ underlying investment performance. 33. Investment gains on MAS’ foreign assets have in fact remained relatively stable for last five financial years. •  Holding $ exchange rate constant to strip out translation effects, foreign investment gains amounted to $ billion in FY2014/15, comparable to foreign investment gains of $ billion in FY 2013/14. Helping Singaporeans manage their finances 34. A key area of focus for MAS in last two years has been to help Singaporeans better manage their finances. A multi-pronged effort: •  Encourage prudent borrowing  •  Facilitate retail access to simple, low-cost investment products  •  Spur competitive pricing for life insurance products  •  Educate consumers on financial matters  Let me elaborate on each. First, MAS has put in place various measures to encourage prudent borrowing 35. Many safeguards already exist. BIS central bankers’ speeches  5  •  Amount of unsecured credit that FI can extend is limited to four times monthly income of borrower. •  Limits on both loan-to-value and loan tenure for both housing and motor vehicle loans extended by FIs.