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Asset Management Research - January 18, 2011

Research plays a key role in driving knowledge creation, knowledge dissemination and innovation - an interview with Ong Chong Tee

In this interview, we talk to Mr Ong Chong Tee, Deputy Managing Director, Monetary Authority of Singapore and a member of EDHEC-Risk Institute's International Advisory Board, about the status of Singapore as a financial hub, the balance between regulation and the need to encourage competition, and the role of research and education in the financial industry.

Monetary Authority of Singapore

What is the status of Singapore as a financial hub and the key current trends?

Ong Chong Tee: Singapore is, and will continue to be an important international financial centre. Surveys such as the Z/Yen Group’s Global Financial Centres Index (GFCI) and World Economic Forum Financial Development Index testify to this. For example, in the most recent GFCI report published in September 2010, Singapore was rated the top centre, outside of China, which is expected to grow in significance and is most likely to attract new offices in the next few years (Shenzhen and Shanghai occupied the top two spots). This reflects international financial practitioners’ growing confidence in Asia, of which Singapore is a key hub serving the region and globally.

There are now more than 700 financial institutions in Singapore, including the world’s leading commercial banks, insurance companies, asset managers and broker-dealers. Singapore is the fourth largest FX centre globally and the second largest FX centre in Asia, after Tokyo, according to the latest survey by the Bank for International Settlements (BIS). This is driven by the large presence of international companies and corporate treasuries in Singapore. The BIS survey also ranks Singapore as sixth largest OTC interest rate derivatives centre globally, underscoring Singapore’s development as a key derivatives trading centre in Asia.

Singapore is also a leading centre for asset and wealth management in Asia, with industry assets under management valued at more than S$1.2 trillion (approximately US$861 billion). More than 80% of the total AUM were sourced from outside of Singapore, demonstrating Singapore’s primary role in serving regional and international investors, especially in Asian markets.

What do you think the drivers of Singapore's rise as a financial hub, and more specifically as an asset management hub, have been?

Ong Chong Tee: The development of Singapore into an international financial centre is underpinned by our strong fundamentals: a well-respected regulatory and supervisory regime focused on high standards, a pro-business stable operating environment, efficient infrastructure, and a competent and experienced financial sector workforce.

What are the policies in place to spur growth and attract asset managers to Singapore?

Ong Chong Tee: There will be a few key factors that will continue to drive the growth of the asset management industry in Singapore. One, is the growing demand for professional investment management services within Asia, complementing the global interest in Asia investment opportunities.

The second, is Singapore’s continued focus on a well-regulated and cost efficient business environment with strong regional connectivity.

A third area will be in talent development. The financial sector, including the fund management industry, is a talent-driven sector which depends on finding the right talent and inculcating the right standards and competencies. In order to ensure a steady pipeline of talent for the industry, a number of initiatives have been developed to build competencies for the financial sector. For instance, the Financial Industry Competency Standards – a comprehensive quality assurance framework with a certification and accreditation system – was developed to deepen the professional skills of the financial community in Singapore. As of March 2010, about 4,000 financial practitioners have been trained under the FICS framework, and over 160 financial institutions have sponsored their staff to these programmes.

Yet another aspect of industry development is on building capabilities for Asian focused research. Singapore has built up a good eco-system of research institutes with an emphasis on Asia-focused research. EDHEC Risk Institute-Asia is a strong addition to the cluster. We believe that these research institutes play a significant role in developing thought-leadership that will provide innovative solutions and deepen the intellectual intensity of the asset management sector.

How does the Monetary Authority of Singapore strike a balance between necessary regulation of the financial markets/institutions and the need to encourage competition and innovation?

Ong Chong Tee: In June 2010, MAS released a monograph on the "Tenets of Effective Regulation”, which describes the Tenets that underpin MAS’ regulatory framework.

MAS expects our regulatory regime to be based on high standards and sound practices to underpin the stability of the financial system as a whole, as well as support sustainable development of the financial services sector.

The effectiveness of a regulatory framework has to be understood against a broad range of tests or considerations that include: the stability of the financial system as a whole, the transparency and clarity of regulations, the balance of costs and benefits, and the needs, often competing, of the various stakeholders.

To be effective amidst and with regard to the various considerations and stakeholder needs, regulation has to observe and uphold six fundamental Tenets:

  1. Outcome Focused;
  2. Shared Responsibility;
  3. Risk Appropriate;
  4. Responsive to Change and Cycles;
  5. Impact Sensitive; and
  6. Clear and Consistent

These Tenets derive from MAS’ four key principles of financial supervision, namely “Risk-Focused”, “Business-Friendly”, “Disclosure-Based”, and “Stakeholder-Reliant”. More details on the Tenets and principles can be found in the monograph which is available on the MAS website.

Ultimately, success in achieving effective regulation requires more than MAS setting demanding standards of itself. Industry has a critical role to play by taking shared responsibility for and ownership of the regulatory objectives, as well as instituting high standards of governance and controls for itself.

What is the role of research and education in the financial industry? What is your opinion on EDHEC-Risk Institute setting up its Asia-Pacific operations in Singapore?

Ong Chong Tee: Research plays a key role in driving knowledge creation, knowledge dissemination, and innovation to meet the needs of the financial industry. Education is a primary conduit to transfer new knowledge and thinking to industry practitioners, thereby enhancing their professional and technical competencies. Both research and educational/training activities are important enablers that underpin Singapore as a leading international financial centre.

As mentioned earlier, we have a vibrant eco-system of universities and research centres of excellence in Singapore that conducts industry-relevant research and provides training to the financial sector. They include, inter alia, the NUS-Risk Management Institute, SMU-BNP Paribas Hedge Fund Centre, Sim Kee Boon Institute for Financial Economics and INSEAD Asia Pacific Institute of Finance.

We are pleased that EDHEC-Risk has chosen to base your Asian research chapter in Singapore. The presence of EDHEC-Risk will certainly add to the financial research landscape and to the development of risk management solutions for the investment community. We look forward to working closely with EDHEC-Risk Asia.

About Ong Chong Tee

Mr Ong Chong Tee is MAS’ Deputy Managing Director overseeing the central banking functions of Monetary Policy, Markets and Investments, as well as the Development functions.

There are three Groups under Mr Ong’s oversight :

  1. Markets and Investment Group that is in charge of reserve management and monetary & domestic markets management. This group is responsible for the management of foreign reserves, the implementation of monetary policy and the development of the domestic government bond market.

  2. Economic Policy Group that is in charge of economic surveillance and economic analysis. This group undertakes economic research and analysis for MAS’ monetary policy functions, as well as broader research relating to the Singapore and global economies.

  3. Development Group that oversees financial centre development.

Mr Ong joined MAS 24 years ago. He was Representative of MAS New York Office from 1991-1994.

Mr Ong is a Board Member of the Urban Redevelopment Authority of Singapore, and has also served on the Boards of Singapore Land Authority and the Central Provident Fund. He is also a member of the Board of Trustees of retirement savings schemes in a couple of Ministries.

Mr Ong was awarded the Public Administration (Gold) Medal in August 2007.