Liberalisation has brought about major changes in the local banking scene. From six local bank groups (not counting 1 POSBank) in 1997, we are now down to three through mergers and acquisitions. More importantly, the local banks have rationalised their operations, upgraded their risk management systems, and introduced new products and services. The recent housing loan price war is an example of consumers benefiting from more banking competition. But fiercer competition has also inevitably meant that small accounts enjoy fewer cross-subsidies, and have to bear higher charges and tighter usage limits. The Basic Banking Account scheme will help reassure consumers that necessary reforms will not leave them without banking services. Overall, our banks face tougher challenges than before – fiercer domestic competition, greater uncertainties in the region, more complex operations, and stronger pressure to improve returns. Perhaps the local banks sometimes look back on the good old days with nostalgia. But we had no choice. The old dispensation was not sustainable. Even the present situation may not last. Certainly, the local banks have built up their size and regional footprints. They are now the three largest banks in Southeast Asia. But will this be enough for them to hold their own against bigger 2 players? Our largest bank, DBS, is only ranked 86th in the world in terms of assets . Australia has a “4-pillars” policy that discourages consolidation amongst its major banks. But Singapore has not established its own “3-pillars” policy, and most probably cannot afford one.
This has enhanced our understanding of the commercial environment and invigorated our organisation. Just as MAS has gained from such insider insight, industry too needs its share of talent. Through the mixing of talent between the public and private sectors, industry will also come to understand the intent and thinking behind MAS’ policies and actions. Over time, this will lead to a healthier and more constructive relationship where MAS and industry together work toward developing Singapore as a world-class financial centre. Enhance market discipline Fourth, we need to continue to enhance market discipline. The easy part is to establish and enforce the right rules for disclosure and corporate governance. Getting companies to internalise and abide by the spirit of tighter rules will take longer, though our standards of disclosure are already quite good compared to other countries. The most difficult part will  BIS Review 62/2002  7  be enhancing consumer education and awareness, without which, as I noted earlier, disclosure and caveat emptor cannot work. We do not need to convert the entire population into Chartered Financial Analysts. But we must help the public to understand basic finance and investment concepts, and to make effective use of the information that is available. They also need to understand that investing is for the long term and should be based on fundamental analysis. This requires a collective effort on the part of MAS, industry bodies and consumer groups.