While cost will inevitably be an important consideration, this should be weighed against the significant benefits and operational savings from the more accurate allocation of capital to risk. MAS will work closely with the local banks to implement the new Accord. Business and strategic considerations Next, banks have to decide how to grow and position their businesses over the longer term, especially the local banks. Maintaining margins and cutting costs is necessary in the short term, but beyond that, banks need longer term strategies for staying viable and competitive. After a period of domestic consolidation, the local banks have made several regional acquisitions, but they still remain small by international standards. Competition will intensify, within the domestic market because of liberalisation, and internationally because globalisation is continuing. The local banks may well find that in order to hold their own and be viable, they need to grow bigger. Possibilities for domestic growth are limited other than through further consolidation. But the region offers considerable opportunities. Asia is poised for sustained growth, having emerged from the Crisis as one of the most promising regions in the world. Countries have gone through a period of structural reforms and transformed their financial sectors. Now they are progressively opening up their  4  BIS Review 39/2004  economies to greater foreign participation. This is attracting interest from major regional and global players. Our local banks cannot ignore this game. They need to consider their options carefully.
b.  Secondly, MAS is prepared to grant a limited number of new Wholesale Bank (WB) licences to applicants that meet our admission requirements. BIS Review 39/2004  3  c.  Finally, QFBs will with immediate effect be allowed to negotiate with the local banks on a commercial basis to let their credit card holders obtain cash advances through the local banks’ ATM networks. Singapore now has one of the most liberal banking environments in Asia. However, over time, as the industry changes, we must be ready to liberalise further. MAS will reassess the environment before deciding on any further measures. While it is still too early to make a final judgment, banking liberalisation has so far achieved its aim of bringing about greater competition. It has fostered the consolidation of the local banks, which might otherwise have taken much longer. The overall market shares of local and foreign banks have not changed drastically, but there has been an all-round qualitative improvement which has enhanced the vibrancy of Singapore’s financial sector. The liberalisation measures and reforms of the last few years have set the financial sector on a firm foundation. However, we cannot afford to rest on our laurels. Challenges as well as opportunities exist for both the banking industry and the financial sector as a whole. We must identify and respond to them, in order to keep the financial sector dynamic and competitive. Challenges for banks For banks, I will focus on two main challenges.