5 strategies to develop financial sector: SM

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INFRASTRUCTURE investments in Asia is set to grow by leaps and bounds in the
coming years and Singapore aims to be at the forefront of financing those
projects.

And this is just one of five strategies to develop the financial
sector which Senior Minister Goh Chok Tong unveiled at the annual dinner of the
Association of Banks (ABS) last night.

"Asia needs to spend about US$8
trillion on transport, power and communications infrastructure over the next
ten years for Asia to emerge as a viably connected, integrated and competitive
region. Such infrastructure investment will spur the region's growth, and will
potentially add US$1.6 trillion or 10 per cent to developing Asia's GDP by
2020," he said.

To tap on that, the government is now working with
multilateral agencies to attract more private sector investments into viable
infrastructure projects, while encouraging ABS members to undertake more Asian
infrastructure financing out of Singapore. Last year, the government launched
the Asia Infrastructure Project Development to assist municipal governments in
sourcing for funds, from commercial banks and private investors, for
commercially viable public private partnership infrastructure projects.

Secondly, Singapore will seek to tap on the growing wealth in Asia as
investors now pay more attention to wealth protection besides growth.

"We
have a reputation for a sound regulatory regime and a trusted legal and
governance framework. We should build on this foundation to facilitate the
growth of a trusted ecosystem for the asset management industry, encompassing
high standards of risk management, transparency and industry
competencies."

He noted that the asset management industry here had grown by
an average of 20 per cent per annum over the seven years before the present
crisis, thus illustrating the growth potential of the fund management sector.
Also, the landscape has become more diverse, and "most of the fund management
firms here are from countries in Japan, Europe and the US and, reflecting the
international character of our asset management industry".

Thirdly, he said
that Singapore needs to maintain a sound and progressive regulatory regime to
restore confidence in the sector. The government is also open to raising the
regulatory bar further, in keeping with changes in global regulatory standards.

For this reason, the Monetary Authority of Singapore (MAS) recently carried
out a consultation on proposed changes to the regulatory framework on the sales
and marketing of structured products to retail investors. Also, it found that
financial institutions need fundamental changes in both business models and
mindsets to win back the trust and confidence of consumers.

Therefore, the
central bank will fine-tune its approach to supervision of market conduct of
financial institutions, including greater probing of the boards and senior
management of the steps they are taking to embed fair dealing outcomes in all
their processes, from product approval to staff incentive structures.

In his
speech, Mr Goh disclosed that the three banks and one finance company have
offered settlements of $105 million on a "no-admission-of-liability" basis to
over 3,600 investors, who were mis-sold the Lehman-linked structured
products.

Fourthly, the government will try to enhance the risk management
capabilities and market infrastructure here through initiatives to mitigate
counterparty risks.

Another initiative which will strengthen Singapore's
market infrastructure is the ongoing industry effort to enhance the framework
for the fixing of the Singapore interbank offer rate (Sibor) and the Swap offer
rate (SOR).

"In Singapore, the ABS has conducted a review of Sibor and SOR
fixings and found the methodologies and processes to be sound. Nevertheless,
governance of the fixings can be strengthened by expanding the resources and
scope of the oversight committee. These proposals will be circulated to
members for comments shortly."

Finally, Mr Goh emphasised the importance of
building a talent pool and intellectual capacity during the downturn, which is
why the government has agreed to cofund up to 90 per cent for training schemes
supported by the Financial Sector Development Fund.

Meanwhile, United
Overseas Bank head Wee Ee Cheong has taken over from OCBC chief executive David
Conner as the new chairman of ABS.

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