SINGAPORE – The Republic’s central bank has a 50-year track record of sound economic principles mixed with creativity, but disruptive technologies and climate change are some challenges it will grapple with as it continues to grow the financial sector, said Prime Minister Lee Hsien Loong on Thursday (Oct 7).
“Looking ahead, we see emerging disruptive technologies such as artificial intelligence, blockchain and the Internet of things,” said PM Lee.
He was speaking at the Monetary Authority of Singapore’s (MAS) 50th anniversary partners appreciation evening, which was live-streamed at the MAS Building in Shenton Way.
Besides new business models such as decentralised finance and the use of crypto assets, MAS will also have to deal with the transition to a low-carbon economy as climate change raises new priorities, said PM Lee.
“MAS will again need the optimal blend of creativity and caution as it deals with these challenges, and creates new opportunities for our financial sector and economy,” he added.
The MAS has helped to sustain macroeconomic stability and confidence in Singapore, create a safe and internationally trusted financial system, and attract investments and create good jobs in the financial sector, noted PM Lee.
Pointing to how the central bank has creatively adapted policy frameworks to suit Singapore’s context, he said: “It set high regulatory and supervisory standards, while taking a facilitative and risk-proportionate approach.
“It also ensured financial stability, while promoting innovation and seizing opportunities.”
But PM Lee added that MAS did not achieve its success alone. “It enjoys political stability, healthy public finances, good public administration and the rule of law. These all enabled MAS to pursue its objectives.”
Close collaboration with the private sector, such as by tapping industry expertise and co-creating infrastructure and solutions, has also paid off.
The launch of the Asian Dollar Market in 1968 – before the MAS was established – was one such instance.
This stemmed from a conversation that same year about potential opportunities for Singapore between Dr Albert Winsemius – then the chief economic adviser to the Singapore Government – and his friend, Mr J. D. Van Oenen.
Mr Van Oenen was the vice-president of the Bank of America branch in Singapore.
He said Singapore occupied the gap in global trading hours between America and Europe, and was therefore well placed to facilitate round-the-clock trading in currencies and securities.
Finance Minister Hon Sui Sen, who later became MAS’ first chairman, discussed the proposal with founding prime minister Lee Kuan Yew, and they acted on it.
“Singapore did not emerge as an international financial centre by chance or natural evolution… This was the spark that ignited Singapore’s growth as a regional and international financial centre,” said PM Lee.
After MAS was set up, it evolved foreign exchange policies over the years to safeguard domestic monetary management and eventually allowed residents and corporations in Singapore to transact in all currencies without limits.
Singapore is now the world’s third-largest foreign exchange centre, after London and New York, with total assets in the Asian Dollar Market exceeding US$1.4 trillion (S$1.9 trillion).
The MAS was also the first central bank in the world to adopt an exchange rate-centred monetary policy framework in 1981.
“Our unconventional approach stemmed from a clear understanding of Singapore’s uniquely open economy, and the courage to depart from conventional monetary policy,” said PM Lee, noting that the Singapore dollar’s managed float regime has also kept inflation in check.
The MAS has also made strides in its calibrated liberalisation of the financial sector, intervening together with other government agencies to stabilise the property market, and making Singapore a global fintech hub, said PM Lee.
“The journey ahead will be as challenging as ever. But I am confident that the MAS team, together with support from our industry, will continue to deliver on its mission faithfully and successfully.”
MAS managing director Ravi Menon said the central bank could not have succeeded without partnering other government agencies, as well as the private sector.
These collaborations have also helped Singapore tide through crises over the years, including the 2008 global financial crisis and the ongoing Covid-19 pandemic, he said.
He added: “In a world where many regulators are aloof at best and hostile at worst when it comes to dealing with the industry, the relationship MAS has with the industry here is special.
“To be sure, we are a no-nonsense supervisor… but MAS has always believed that working with the industry rather than against it is the best way to achieve our shared objectives, keeping the system safe and growing the business.”
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