Ong Chong Tee: The post-crisis financial landscape - what next? Remarks by Mr Ong Chong Tee, Deputy Managing Director (Financial Supervision) of the Monetary Authority of Singapore, at the Society for Financial Studies Cavalcade Asia-Pacific Conference's Gala Dinner, Singapore, 13 December 2018. * * * Professor Laura Starks – President, Society for Financial Studies Professor Ron Masulis – Program Chair Professor Jun-Koo Kang – Associate Chair, Nanyang Technological University Professor Bernard Yeung – Dean and Stephen Riady Distinguished Professor, National University of Singapore, President, Asian Bureau of Financial & Economic Research Professor Massimo Massa – The Rothschild Chaired Professor of Banking, INSEAD Associate Professor Johan Sulaeman – Dean’s Chair, Department of Finance, NUS Business School Ladies and gentlemen, a very good evening. Thank you for inviting a few of my MAS colleagues and I to be here tonight. Introduction 1 The SFS Cavalcade conference is a distinguished forum that brings together some of the sharpest minds in the world of finance and research. 2 This evening, I thought I could share some perspectives of a financial regulator. My hope is to flag a few pertinent issues that could do well with more research insights and discussion. As the great Hungarian scientist Albert Szent-Gyorgyi once said: “Research is four things: brains with which to think, eyes with which to see, machines with which to measure and fourth, money”.
Unlike 2008, the solvency and liquidity of the banking system was not at the very forefront of market and regulator concerns. And, of course, the shock itself did not originate in the financial system but rather in a once-in100 year pandemic that has left us with many other, more powerful, and disturbing memories. But it is worth refreshing our memories about just how extraordinary were the events of late February and March 2020. The realisation that we were facing a global pandemic – and that, in order to contain it, large parts of the global economy would need to be shut down – sparked a reassessment of financial asset values and, as one would expect, a ‘flight to safety’ by investors. In February 2020, as you would expect, risky asset prices fell sharply. At the same time, the price of traditionally safe assets rose sharply and yields fell – the yield on US treasuries for example fell by around 100 bps. This flight to safety was also reflected in the gold price, which rose by around 4% over this initial period. In the early weeks of March however – from the 9th to the 18th – a different dynamic took hold; an accelerating ‘dash for cash’ in which, given the illiquidity of other markets, investors sold their most liquid assets, driving safe asset prices down. A dash for cash which turned into a stampede. The numbers are impressive.