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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