Nonperforming loans rose moderately in the second quarter of this year (to 11.9% of total private sector credits), but the growth is continuously slowing, and they are fully covered by loan loss provisions (RM is within the group of countries with largest LL provision coverage ratio). Profitability is lower but positive, and profits are being used largely to strengthen capital buffers. The euroization of deposits continues to decrease gradually to below pre-crisis levels (44% of total deposit are FX deposits or with FX clause). Even though the banking sector is in overall sound shape, the credits developments are not favorable and supportive to companies. The reasons for deceleration of the credits growth are on both sides, but mostly relay on supply side. Banks are likely to remain risk averse in an environment of low interest rate margin and the group strategies limit the credits’ growth potential. Thus, although the banking system mainly relies on domestic sources of funding, the consolidation of the Euro zone banking system and the EC pressure on troubled European banks that have received international bailout to sell their subsidiaries in the region, are the potential source of risks. The slow realization of this process could cause confidence shocks in our economies, thus endangering financial stability. The latest Deleveraging and Credit Monitor well notes this process, it says -while past efforts were focused on raising capital on the market, future efforts are expected to emphasize the sales of assets and affiliates.
Lim Hng Kiang: The Singapore financial services sector Address by Mr Lim Hng Kiang, Deputy Chairman of the Monetary Authority of Singapore and Minister for Trade and Industry, at the ABS Annual Dinner, Singapore, 29 June 2007. *  *  *  Chairman, ABS Council Members of ABS Ladies and gentlemen It is good to be here tonight. The ABS Dinner is an excellent opportunity for the Singapore financial services community to get together, catch up and look ahead. State of the Singapore financial sector 2006 has been a good year for Singapore. The financial services sector has done particularly well. All in, financial services grew 9.2% in 2006, outperforming Singapore’s overall GDP growth of 7.9%. This momentum has carried into this year. 2007 first quarter growth for the financial services sector came in at 13% on a year-on-year basis. Growth has been broad-based, with brokerage, treasury and advisory-related services being the largest contributors. Volumes in the Singapore foreign exchange market have also grown steadily. The equity markets have been hot. Volume of securities traded has gone up sharply. The local debt market has also registered good growth in 2006. In the latest Annual Corporate Debt Review for 2006 which MAS released today, the total market capitalization of the Singapore bond market has reached $ billion. Indeed, the Government’s efforts to grow the Singapore Government Securities (SGS) market have produced results. Since 1996, outstanding SGS has grown from $ billion to $ billion in December 2006. This year we issued the first 20-year SGS.