MAS’ monetary policy stance since 2010 has underpinned the gradual improvement that we are seeing in Singapore’s inflation-growth trade-off. •  MAS is committed to ensuring that recent improvements in inflation are sustained. •  The current policy stance of modest appreciation of the Singapore dollar is appropriate in containing the re-emergence of strong cost and price pressures in a restructuring economy. Strong Singapore Dollar impacts MAS profits despite good investment returns Let me now move on to MAS’ financial results. MAS made investment gains of $ billion for the FY ended March 2013. •  This is lower than the $ billion earned in the previous FY, due primarily to lower interest income as interest rates continued to decline in FY 2012/13. 2  BIS central bankers’ speeches  But MAS recorded an overall loss of $ billion after taking into account translation effects from an appreciating Singapore dollar. •  In FY 2012/13, the Singapore dollar appreciated against all major currencies  •  In particular, the Singapore dollar strengthened 5% against the Euro, 6% against the Sterling, and 14% against the Yen during FY. •  It also appreciated against traditionally strong currencies like the Aussie Dollar and the Canadian Dollar. In short, we made good investment returns, but when measured in Singapore dollars, these gains more than offset by strength of the currency. •  This is an issue of reporting currency. If we had reported our profit and loss in international currency, it would show healthy profit.
This is the main reason why MAS introduced the Total Debt Servicing Ratio (TDSR) framework. During our inspections, we picked up some worrying practices. •  4  Most of them are in property loans –  A couple with combined household income of $ was able to obtain a new housing loan of $ Their monthly installments on this new loan and their existing loan obligations came to more than 90% of their combined monthly income. –  The bank’s decision to approve the loan was based solely on fact that couple had savings deposit of $ This is not prudent. BIS central bankers’ speeches  •  •  We picked up similar instances for car loans –  Some applicants of car loans borrowed close to 100% of the value of car, with little or no down payment, for what is essentially a depreciating asset. –  This is also not prudent. We also found cases of excessive borrowing through credit cards –  A concerned mother called MAS for assistance: her 24-year old son had been paying only the minimum sum on his credit card bills and steadily chalking up debts. –  She requested MAS to stop financial institutions from issuing credit cards to those who have not been making full payment on their credit card bills. Over last three years, MAS has introduced variety of measures to contain excessive borrowing against the backdrop of highly loose monetary conditions globally.