But towards the end of 2011, there was a discernible pullback in trade finance, project finance, and syndicated loans by several Eurozone banks. Specialist lending lines like shipping and aviation also experienced cutbacks. 17. Well-capitalised global and Asian banks with strong liquidity positions have, however, stepped in to fill the gap. For example, Asian banks’ market shares of export bills for Singapore-originated trade activities rose from 36% before the crisis to 55% in the last quarter of 2011. A similar pattern can be observed for trust receipts, where Asian banks’ market shares rose from 55% to 64% over the same period. In fact, aggregate trade finance activity has continued to grow. 18. 2012 will be more challenging though. On the positive side, the funding situation for Eurozone banks has improved, in the wake of the ECB’s LTRO. In January this year, there were net inflows from head offices to the Singapore branches of Eurozone banks. 19. But deleveraging by Eurozone banks is far from over. At the same time, the capacity of Asian banks to fill the trade financing gap is limited:   First, the US Dollar loan-to-deposit ratios of Asia ex-Japan banks are already at elevated levels and could be a constraint.   Second, Asian banks may be more selective about the risks they want to take on, given the uncertain global growth outlook.   Third, Asian banks which are generally smaller may be constrained by counterparty limits from taking over the trade finance lines of the large European banks.
I am pleased to announce today three initiatives aimed at further improving efficiency and liquidity in the Singapore dollar corporate debt market. 40. First, MAS will provide swap liquidity to primary dealer banks handling Singapore dollar debt issuance for foreign corporates. These offshore entities usually have no need for the Singapore dollar funds raised and mostly swap them into a foreign currency, usually US dollars. Although the pricing mechanism in the foreign exchange and cross currency swap market is efficient, swap markets have a tendency towards one-way flow because of Singapore’s excess savings over investments. This can lead to uncertainty in the pricing process of the bond issuance. We will therefore support swap transactions at marketdetermined prices, which will ultimately enable swap market liquidity to build in the longer tenors. 41. Second, MAS will partner the industry to create a Singapore dollar corporate debt securities lending platform, from which key players will be able to borrow securities for market making. By providing greater assurance that banks will be able to deliver any given security, this platform will reduce the risk of market makers being squeezed in the event they are unable to short-cover the bonds they have sold. Improved market liquidity will mean that asset managers can be more certain of their ability to enter and exit their positions with minimal price slippage. 42. Third, MAS has initiated a price discovery platform where market participants will contribute end-of-day prices for a universe of Singapore dollar corporate bonds.