In the process, national incumbents are being challenged by a combination of ambitious foreign incumbents eager to exploit economies of scale and nimble, unencumbered new entrants sometimes specialising in niche products. A process that is likely to lead in time to greater consolidation at international level is currently manifesting itself in terms of fragmentation at the national level as local incumbents are challenged. 36 The end-game may well be lower transaction costs at both the trade and post-trade level and more concentrated (if not monopoly) cross-border infrastructure in each. But it may take some time to reach a new equilibrium. Central banks and regulators need not only to prepare for and perhaps help shape the end-game, but also address challenges arising during the transition. BIS Review 130/2007  5  5. 37 (i)  Issues and challenges for central banks and regulators going forward Two key challenges, in particular, will need to be met: Preserve enough influence to protect the collective interest while maintaining a level regulatory playing field  38 The resilience and efficiency of the core infrastructure is an important public good and, given the tendency to monopoly, the authorities need to ensure that they maintain sufficient influence to ensure resilience in this increasingly complex landscape. That requires consistent and objective criteria to be applied to new as well as established systems.
The current outsourcing and off-shoring trend would also present opportunities for us. One estimate is that two million jobs would be created in lower-cost locations like India and China over the next 5 years. While we cannot compete with India and China on cost, we can compete for processing activities which are mission critical and of higher value-added. In the past year, major financial institutions have relocated higher-end middle and back-office operations here. These institutions take the view that Singapore’s developed infrastructure, reliability, and skilled manpower make us more suitable for these time-sensitive and mission-critical functions. In the banking sector, we have gone from 7 local banks to 3 over the last 5 years. Singapore banks have grown larger and stronger, and they are continuing to build up their regional footprints. As a regulator, MAS is happy that they have made progress strengthening management teams and building up risk management systems. Last year, one rating agency even ranked Singapore banks as being among the strongest not only in Asia but in the whole world.5 However, by international standards, the three local banking groups are still rather small, despite having made some regional acquisitions and undergone domestic consolidation. The largest of them, DBS Group, ranks only 96th in the world in terms of assets. The banks are also mainly Singapore banks, rather than regional players with strong presence in several countries. Possibilities for domestic growth are limited, other than by further consolidation.