S'pore moves in right direction with bank reforms<\/p>\n
By Valerie Lee<\/p>\n
SINGAPORE (Reuters): Sweeping banking reforms, aimed at
\nrevving up growth in Singapore's financial sector and putting it
\non the fast track to international financial hub status, are a
\nplus for its ambitions, analysts said on Tuesday.<\/p>\n
\"Singapore is capitalizing on the fact that while many
\neconomies are tightening, financial liberalization (in the city-
\nstate) is moving in the other direction,\" said Jimmy Koh,
\nregional economist IDEAglobal.com said.<\/p>\n
On Monday, the Monetary Authority of Singapore (MAS) said it
\nwould launch a package of measures aimed at freeing up the
\ncountry's domestic banking sector.<\/p>\n
The MAS measures included the introduction of a new grade of
\nlicenses for foreign banks that would give them greater access to
\nthe local market as well as the removal of a 40 percent ceiling
\non the foreign ownership of local banks.<\/p>\n
\"Clearly with liberalization there should be more active
\nplayers in the market,\" said Terry Chan, director, financial
\ninstitutions rating with Standard and Poor's.<\/p>\n
\"In that sense it will be attractive for corporates and also
\nmulti-nationals to tap funds in Singapore whether directly from
\nthe banks or through issuing papers,\" he said.<\/p>\n
Deborah Schuler, Moody's vice-president and senior analyst,
\nfinancial institutions group, said the MAS' measured rather than
\nBig Bang approach to opening the banking sector may \"indeed be
\nthe best to get the objectives they are seeking, which is to have
\nat least a couple of major Singaporean players in the region.\"<\/p>\n
Singapore's four major banks are DBS Bank, OCBC Bank, United
\nOverseas Bank and Overseas Union Bank.<\/p>\n
The central bank had phased its bank reform package over a
\nperiod of five years, saying it would review the progress made
\nafter three years before deciding on further liberalization.<\/p>\n
Singapore Deputy Prime Minister Lee Hsien Loong, who also
\nheads the central bank, had said at the release of the reforms
\nthat local banks had a few years to \"get their act\" together.<\/p>\n
\"What we have seen everywhere in the world...is that
\nliberalization and deregulation gives you, in the end, stronger
\nbanking systems made up of stronger banks,\" Moody's Schuler said.<\/p>\n
But she said that in the short run there was a chance of a
\nshakeout in the industry.<\/p>\n
The MAS, which has set its sights on turning Singapore into a
\ndebt origination and trading center, also took the right steps in
\nhiking the lending limits of offshore banks, analysts said.<\/p>\n
\"This raises the issue of large-scale borrowing of onshore
\nSingapore dollars (SGD) by offshore players that would make the
\nSGD a funding currency, to sit alongside the Swiss franc (CHF)
\nand the Japanese yen (JPY),\" said Barclays Capital in a Tuesday
\nreport on the measures.<\/p>\n
Barclays research head Desmond Supple said the use of the SGD
\nas a funding currency would be attractive as it was a
\ntraditionally low-yielding currency due to MAS record of price
\nstability and its robust balance of payments situation.<\/p>\n
Over the past year, a slate of supranational, foreign
\ncorporates and local statutory boards have issued a series of SGD
\ndenominated bonds but others have held off due partially to
\nilliquidity in SGD swaps market.<\/p>\n
Analysts said the reform measures were key to the tiny island-
\nstate's continued survival in competitive Asia.<\/p>\n
\"We are depending on manufacturing as the first engine of
\ngrowth and trying very hard to develop the second pillar,\" said
\nKoh of IDEA.<\/p>\n
\"The fall-off in manufacturing has to be augmented
\nelsewhere...we can't go to retail, commerce depends on what
\nhappens elsewhere in the region, so the other engine of growth
\nwill have to be the financial sector.\"<\/p>",
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