Friday, June 10, 2011

Regulations: MAS rebuts Geithner's remarks

Jun 9, 2011

THE Monetary Authority of Singapore (MAS) has defended itself against criticism by United States Treasury Secretary Timothy Geithner, who said Asian regimes should follow America's lead in adopting stiffer financial regulations.

Singapore's regulatory regime is in line with international standards and, in some cases, is more stringent than the requirements, MAS said yesterday.

In response to queries, MAS added that the Republic has not tried to win financial business through 'regulatory arbitrage', referring to banking business moving to places with less stringent regulations.

These comments came after Mr Geithner this week called for a global agreement on derivatives trading.

He warned that the world could face another meltdown if Asia does not adopt tougher US regulations in this field, and said countries should not try to profit from stricter US rules by keeping their own regulations light to attract business.

Mr Geithner did not single out any Asian economy by name, but US officials identified Singapore and Hong Kong as concerns, the Financial Times (FT) reported.

[What crap. Stricter US regulations will bring the US banks closer to international standards. "Regulatory arbitrage" is what the US has been enjoying - lighter or non-existent regulatory regimes in the US allowing for sub-prime mortgages leading to the financial meltdown.]

Both financial centres promptly rebutted Mr Geithner's comments.

'Singapore's regulatory regime has always been aligned to international standards and best practices,' said MAS.

'In fact, in some areas, Singapore's regulatory requirements exceed international norms,' it added, citing rules relating to bank capital adequacy ratios.

'Singapore has not sought to lure financial business away from other centres through regulatory arbitrage.'

MAS also said its clearing infrastructure for over-the-counter derivatives meets international standards, and that it 'will ensure that its clearing infrastructure will meet any enhanced future international standards'.

The Hong Kong Monetary Authority responded in a similar fashion, saying its banking supervision was currently tighter than international norms.

Mr Martin Wheatley, Hong Kong's outgoing head of the Securities and Futures Commission, also told FT that 'both Hong Kong and Singapore are putting global regulatory standards in place in exactly the same way as other markets'. 'The fact that business is coming here is not a question of regulatory arbitrage; it's a question of growth and opportunity,' he said.

Action Economics economist David Cohen suggested that Mr Geithner's comments could have been prompted by pressure from American banks, which are worried that tighter curbs in the US would put them at a competitive disadvantage.

[And this is the US banks trying to con their regulators into loosening the regulations so the US banks can continue to play fast and loose and make lots of money before the next big bang. The regulators are too stupid to realise this? This is what happens when the regulators are dumber than the people they are trying to regulate.]

Dr David Lee, managing director of Ferrell Asset Management, said: 'He (Mr Geithner) is worried about regulatory arbitrage, that what is onshore now will move offshore... and will take away more jobs which they are trying to retain at the moment.'

But he said Asian regulators would not necessarily want to let these risky instruments be traded in their jurisdictions.

'What makes you think that Asian central banks are not savvy enough to block unwanted risk - what the US does not want onshore?'


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