Singapore can offer Asian borrowers a venue to raise capital, not necessarily in $ by reaching out to Asian-based investors who will be more familiar with their businesses, and will view their risks with less apprehension than investors outside Asia. We recognise that the liquidity of the $ market, and MAS rules to discourage the internationalisation of the $ constrain the growth of the bond market. We are not likely to change our basic stance against $ internationalisation. But we have relaxed the specific restrictions, and will continue to review regularly how much further we can safely go. International bond markets are rapidly moving towards electronic trading, as equity markets have long done. This will tend to concentrate bond trading in a few centres around the world - London, New York, and perhaps one Asian centre. Singapore will contend to be that Asian centre. But trading alone is insufficient to make us a major hub for capital markets in Asia. We must attract and develop expertise in originating and structuring debt issues and products, areas where we have traditionally lagged behind Hong Kong and the more developed markets. Fund management The Government will continue to put out more money for the fund managers to manage. We will also encourage individuals to be more active in managing their own retirement savings. Retirement funds should earn higher returns than the risk-free interest rate offered by the CPF Board. Some have suggested that the CPF should therefore raise its interest rate, but that would be the wrong approach.
As Securities & Exchange Commission Chairman Arthur Levitt Jr said recently, “No government agency can protect you from your own foolishness”. Our dot-com mania is much milder, but Singaporeans too are carried along by the general enthusiasm for tech stocks. MPs have already expressed concern about SGX’s more liberal listing rules, because they fear the public does not understand the risks, and may even believe that the government approves of the companies, or else it would not have allowed Singaporeans to invest in them. Much as we hope to prevent the dot-com enthusiasm from getting out of hand, we cannot go back to merit regulation, judging the business merits of IPO candidates. The surest form of investor education is to get burnt. But we hope the lesson, if it comes, will not be too painful. MAS As the regulator, MAS must continue to build up its expertise and new skills, to better understand and recognise the different types and magnitudes of risk faced by financial institutions. This will equip us to assess the adequacy of systems and capabilities set up by financial institutions to manage risk, and to craft appropriate supervisory responses. We seek to regulate with a lighter touch, but a lighter touch does not mean doing less. Risk-focused supervision is more difficult to do than taking a one-size-fits-all approach. It demands much greater understanding of the business and risk profile of the institution and the exercise of judgement as to where dangers may possibly arise.