Future bright if finance sector adapts

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THE outlook for Singapore's financial sector remains bright, according to Senior Minister Goh Chok Tong.

But he says industry players need to adapt to the new realities of the post-financial crisis landscape if the Republic is to remain a leading financial hub.

Speaking to Singapore bankers at the Association of Banks of Singapore (ABS) annual dinner at the Meritus Mandarin Hotel last night, Mr Goh acknowledged that 'the tone of discussions about the global financial industry has been rather subdued and introspective'.

But banks here should take heart, he added. 'Singapore is situated at the heart of a growing Asia,' he said.

'Rapid urbanisation will mean more infrastructure projects need financing and Asia's demographics also mean that there will be great demand for wealth planning and products like life insurance.'

Meanwhile, the crisis has resulted in a greater emphasis on competence, trust and good governance - all qualities that Singapore's financial sector has built a reputation for, he said.

But Mr Goh also warned it was vital that Singapore does not rest on its laurels despite its many global accolades.

'It is important not to be complacent as trust, good governance and our reputation for competence require continuous reinforcement as standards change and new demands arise,' he said. 'Nevertheless, our strong fundamentals will give us a firm footing to tap the region's growth opportunities when they come.'

Mr Goh, who is also chairman of the Monetary Authority of Singapore (MAS), laid out five steps to achieving this goal - including measures to make it easier for small investors here to buy government bonds.

First, Singapore must maintain a sound and progressive regulatory regime for the sector - a framework already regarded as stringent pre-crisis.

Second, it has to tap Asia's growing wealth. One key strategy is for the sector to position itself for a shift by wary investors, burnt by the crisis, towards demanding less complex and more transparent investment products, he said.

'To this end, we are currently working to improve individual investors' access to one such investment instrument - Singapore Government Securities, or SGS.'

He said SGS - government bonds - are a useful pricing benchmark for local corporations issuing bonds. Many institutional investors favour SGS as a liquid and safe investment alternative.

'Because of rising interest among individual investors to purchase SGS, from July 1, individuals will be able to participate in SGS auctions by submitting bids through the ATMs, similar to bidding for an equity IPO (initial public offering),' he added.

In time, SGS might also be traded on the Singapore Exchange like stocks.

Third, Singapore can also capitalise on Asia's infrastructure needs - worth about US$8 trillion (S$11.6 trillion) over the next 10 years as the region builds roads, ports and airports.

The fourth strategy is to enhance Singapore's risk management capabilities and market infrastructure - an area where Singapore can take the lead.

He said one move to strengthen market infrastructure is an industry effort to enhance the framework for the fixing of the Singapore Inter-Bank Offer Rate (Sibor) and the Swap Offer Rate (SOR).

These are benchmarks for interest rates - used for instance to peg the level of variable mortgage rates.

He said the ABS had reviewed the way the rates are derived and found them sound - but added they could be further strengthened.

Finally, Singapore should take advantage of the downturn to further build its financial sector talent pool.

Mr Goh referred to the Financial Sector Development Fund - an MAS initiative co-funding up to 90 per cent of training schemes at financial institutions. 'MAS has also launched new schemes to spur the creation of job and industry internship opportunities for fresh graduates. This will ensure a ready pool of young talents, well-trained and ready to contribute to the growth of the financial sector when the economy recovers.'

Citi Singapore country head Jonathan Larsen told The Straits Times: 'As a financial centre, Singapore offers a progressive supervisory regime, a pro-business environment, skilled talent and world class infrastucture.'

He said that Citi remains committed to investing in Singapore adding: 'Singapore's strong fundamental positions the country to play an even more important role as a financial services hub as global economies recover from the current recessionary conditions. This is particularly so in the areas of wealth management for high net worth individuals and treasury services for regional corporates.'

See also Prime Page A6

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