In doing so, we must define robustly the boundary between going and gone concern loss absorbency ;  -  second, a framework for capital which comprises minimum capital requirements and capital buffers, with the buffers varying in size depending on a bank’s size and the nature of its activity and risk, and varying through the cycle;  -  third, using a combination of different approaches to assessing capital adequacy – risk-based approaches, stress tests, and a leverage ratio;  -  fourth, within the risk-based approach, striking a balance which recognises the potential benefits of firms’ internal models while guarding against their weaknesses and the incentive problems they create. A major principle of the new framework is that there is no single “right” approach to assessing capital adequacy. The very important role that is now given to stress tests illustrates the point. This year the PRA and FPC are running their first concurrent stress tests for the major UK banks, building on the past development by the FSA and then PRA of sequential firm-by-firm stress tests. This is a key device to examine and mitigate tail risks,  5  http://www.bis.org/publ/qtrpdf/r_qt1309e.prf. 6  http://www.bis.org/publ/work357.htm. 7  https://www.imf.org/external/pubs/ft/wp/2013/wp13102.pdf. 8  http://www.bankofengland.co.uk/research/Documents/workingpapers/2014/wp486.pdf. 6  BIS central bankers’ speeches  and like all good forecasting exercises, the stress test is designed to probe important issues rather than just provide a single answer.
Our challenge was to free up this industry so that it could continue to develop and grow, without compromising stability and soundness in a changing landscape. Strong and wellmanaged local banks, with a significant share of the home market, were and are critical to the resilience and stability of our financial system. However, we could no longer maintain this by restricting access to the domestic market. We needed to permit more competition, but in phases, to allow the local banks to adjust and compete effectively. 2  BIS Review 39/2004  MAS therefore introduced a five-year programme to liberalise access to Singapore’s domestic banking market. We made the first moves in 1999. As we lightened our regulatory touch, we also worked with banks to set guidelines for best practices and give banks greater room for enterprise and innovation. Stronger banking industry Today, Singapore’s banking sector is more open and dynamic. This has come about without sacrificing strength and stability. Individual banks and the industry as a whole have risen to the challenge. Existing players have upgraded and strengthened themselves. Banks have maintained high prudential standards, become more efficient and improved their service quality and product ranges. The foreign banks have contributed to the vibrancy of the Singapore banking scene. Competition has led to the development of a rich array of innovative products and more discriminating pricing models. Customer service as a whole has improved.