This guideline is unlikely to stand in the way of market development, as the $ is not a currency commonly used for transactions abroad, and non-resident entities would in any case wish to swap or convert the $ proceeds into a currency of their choice for overseas use. With this liberalisation, the following will now be possible. a. First, MAS will exempt all individuals and non-financial entities, which includes corporate treasury centres, from the $ lending restrictions of the non-internationalisation policy. This recognises that such entities are not usually the prime drivers of destabilizing currency speculation. b. Second, for non-resident financial entities that continue to be governed by the $ policy, we will lift restrictions in the following financial activities: i. Asset swaps, cross-currency swaps and cross-currency repos can now be transacted freely. MAS had hitherto treated such transactions as forms of $ lending. It will no longer do so. ii. Securities Borrowing and Lending (SBL) – Financial institutions in Singapore may now lend any amount $ securities in exchange for both $ or foreign currencydenominated collateral. MAS will lift the requirement that any lending of $ securities exceeding $ million has to be fully collaterised by $ collateral. BIS Review 19/2002  3  iii. $ FX options – Financial institutions may also freely transact $ FX options with nonresident entities. FIs no longer need to maintain documentary proof showing that $ FX option transactions with non-resident entities are for hedging purposes. iv.
Yet upside risks persist here, stemming mainly from the possibility of further increases in oil prices – given the instability of the market – and from the potential emergence of second-round affects in a more buoyant economic setting. But the fact that the level of output is still below potential provides leeway for the recovery to continue for some time without generating excessive inflationary pressures. In any event, the European Central bank will remain watchful so as to prevent risks to price stability in the medium term from materialising. The Spanish economy Throughout last year and in early 2006, the expansionary cycle of the Spanish economy continued and intensified, in contrast to the difficulties experienced in the euro area as a whole in emerging from the phase of low growth currently in train. Spanish GDP increased by 3.4% in 2005, while employment advanced at an equally high rate of 3.1%. In both cases, these rates were several tenths of a point up on the previous year's figures. Moreover, 2005 saw the publication of the new Spanish National Accounts base 2000 figures, which meant a considerable upward revision of economic growth since 1995 and, especially, since 2000. These new estimates reflect more appropriately the dynamism of the population and of employment these past few years, and they show a more buoyant economy more closely in step with the expansionary behaviour seen in other economic variables such as credit or tax revenue.