We also need a pool of knowledgeable analysts and journalists who will shine the spotlight on any obscure fine print that the lay investor fails to notice. A more informed and sophisticated investor base will reinforce market discipline and form the basis for a more vibrant and mature financial sector. In all these respects, we have a long way to go. Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD. Liberalising the financial sector We began to open the financial sector to greater competition while the region was reeling from the Asian Crisis. This went against conventional wisdom. Opening up during such a time seemed like throwing away the life-jackets as the flood waters rose. We thought otherwise. We could see the flood approaching – not just the storm we were then in, but the greater climatic challenge posed in the longer-term by the worldwide changes in the financial  BIS Review 62/2002  3  industry. We decided that we had better learn to swim before the deluge overwhelmed us. Furthermore, our actions to liberalise in the midst of the crisis would send a clear signal that Singapore’s financial centre would always be open for business. Banking The two major areas of liberalisation have been in banking and the capital markets.
We offer political and economic stability, the rule of law, efficient infrastructure and a highly-skilled professional workforce. These are exceptional attributes, which lend themselves well to activities like wealth management. We need to find new ways to market them and bring in business. Enhancing monetary policy effectiveness Our decision to progressively relax restrictions on the use of the Singapore dollar was a calculated risk. At a time of heightened volatility in currency markets, it stood in stark contrast to our regional neighbours. However, the liberalisation has yielded dividends. Our capital markets have grown and deepened without adversely affecting our ability to manage the exchange rate. In practical terms, we have now gone as far as we can to relax the restrictions while still maintaining the principle of not-internationalising the Singapore dollar. All but two restrictions have been lifted – thou shalt not borrow Singapore dollars to speculate in the currency, and if thou shouldst borrow for offshore purposes, then thou shalt either swap or convert the Singapore dollars before taking them out. These remaining commandments are an important signal that we have not changed our fundamental stand against outright speculation on the Singapore dollar, even though we have permitted nearly all activities of legitimate investors. 3  Today outstanding SGS is about $ billion, compared to just over $ billion in 1997. 4  From 1998 to 2001, corporate debt issuance in Singapore has increased eightfold to $ billion.