The national central banks will purchase the bonds issued by European institutions and most of the domestic bonds, the ECB purchasing 8% of the latter. According to our preliminary estimates, the purchases of Spanish government debt will amount to some € billion over the time horizon considered. The agreement reached means that, in the hypothetical event that losses arise from these operations, the national central banks would assume the risks of their purchases of government bonds, while the risk of the purchases of the bonds of European institutions and of sovereign bonds by the ECB would be shared by all the members of the Eurosystem. Monetary policy leeway in a very low inflation environment Let me now comment briefly on two matters of importance in the current context: the leeway available to monetary policy in a very low inflation environment and the different cyclical moment of monetary policy in the main developed economies. The particularly low inflation rates and the prospect that they will remain at similar levels for a prolonged period reduce the scope for monetary policy to bring the financing conditions of the economy into line with its cyclical position when that position is characterised by notable weakness. Conventional monetary policies based on setting short-term nominal interest rates reach their lower bound when rates approach 0%.
It has issued consumer guides and organized public seminars to educate consumers on fire insurance, property insurance, health insurance and motor insurance under the MoneySENSE national financial education programme. There is, however, more to be done. As Mr Teo mentioned earlier, general insurance penetration remains low in Singapore. Insurance density, measured by gross premiums as a percentage of GDP, rose from 1.0% in 2000 to 1.5% in 2005, but this is still lower than the 1.8% in Malaysia, 1.6% in Thailand, 2.9% in Taiwan and 3.0% in South Korea. When compared against developed countries like UK and Switzerland, which reported insurance densities of between 3.5% and 5.0%, we are much further behind. There is therefore significant room for the industry to grow. It would be worthwhile for GIA to focus on improving insurance penetration in Singapore by identifying insurance lines that have greater prospects for growth. MAS’ supervisory approach MAS believes that there should be a constructive partnership between the regulator and the industry. On our part, we will continue to fine tune our supervisory approach to support the growth of the industry. Competition is a necessary ingredient for growth, but there are many areas where the industry can work together. In particular, the industry should work together to promote best practices in risk management and professional standards. MAS will continue to support efforts by the industry to promote sustainable and healthy growth by maintaining an appropriate regulatory framework that recognises innovation.