<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Jan 31, 2009
World Economic Forum in Davos
</TR><!-- headline one : start --><TR>Reform role for SWFs <!--10 min-->
</TR><!-- headline one : end --><TR>They can provide capital to restore financial stability, says Dr Tan </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Alvin Foo
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Dr Tan, speaking at a session entitled 'Scenarios for the Future of the Global Financial System', said that long-term investors like the GIC and other SWFs will grow in significance relative to leveraged investors like hedge funds because they are 'real money' investors.
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<!-- START OF : div id="storytext"-->DAVOS - LONG-TERM institutional investors like the Government of Singapore Investment Corporation (GIC) have a key role to play in the reform of the global financial system post-crisis.
That was the message that Dr Tony Tan, GIC's deputy chairman and executive director, delivered to the high-powered annual meeting of the World Economic Forum (WEF) in Davos yesterday.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>Reforms can go wrong: Three potential risks
REFORMING the global financial system will be a challenging enterprise that can easily go wrong, according Dr Tony Tan, deputy chairman and executive director of the Government of Singapore Investment Corporation (GIC).
That is because the reform has to be international if it is to be effective, as many key financial institutions are globally interconnected, large and highly complex.
RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
Dr Tony Tan's speech
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>He said that such investors, which include the world's sovereign wealth funds (SWFs), are important in two ways.
Firstly, they will be important providers of capital to battered financial institutions and companies, now that other key investors - such as highly leveraged hedge funds and private equity funds - have been severely damaged by the crisis.
And because they will be important players in the recapitalisation of these institutions, they should therefore give inputs to the central banks and governments that are designing new regulations to prevent the problems that led to the financial meltdown.
Speaking at a session entitled 'Scenarios for the Future of the Global Financial System', Dr Tan said that the nature of the economic crisis warrants new thinking.
Stabilising the financial system has involved extensive government intervention, with taxpayers taking over distressed assets.
'Governments and central banks are likely to end up taking over and owning large swathes of assets from distressed holders as part of the deleveraging process,' said Dr Tan.
A significant portion of these assets may be of good quality but undervalued as institutions cannot hold on to them.
Governments will eventually need to sell off such assets on a massive scale to reduce debt and exit businesses better managed by the private sector.
This will 'inevitably need to involve long-term international institutional investors as key players', he added.
Here, long-term investors like the GIC and other SWFs will grow in significance relative to leveraged investors like hedge funds.
This is because they are 'real money' investors, said Dr Tan. On the other hand, leveraged investors tend to borrow heavily to finance their investments.
Indeed, sovereign wealth funds, including GIC, have gained a global profile over the past year after ploughing billions of dollars into distressed banks like UBS and Citigroup.
He predicted that these 'real money' investors will play a major role in stabilising the financial system given their large and growing asset bases and their long-term investment horizons.
Dr Tan said: 'This would contribute to stabilising financial and household sector losses, thereby helping to restore both credit creation and demand in the real economy.'
As a result of their larger role as capital providers, GIC and other large investors can, and should, play a key role in designing the new financial system that will surely follow the crisis.
He said their input can greatly help markets to function well, and enhance global coordination while minimising the risks of over-regulation and protectionism.
Shaping the financial regulatory system has mainly been the purview of governments, central banks and heavy-hitting investment banks but Dr Tan now sees a need for a broader consensus.
He said large institutional investors and SWFs can provide useful inputs to 'help guard against the danger of financial protectionism'.
Elsewhere in his address, Dr Tan also emphasised the need for a coordinated global effort in redesigning the post-crisis financial world.
Financial institutions are so interconnected these days that any reform of the current regulatory system will need to be international to be truly effective, he added.
Existing organisations such as the Financial Stability Forum and International Monetary Fund will be crucial in leading and coordinating the new system.
Looking into the future, Dr Tan said that the new financial landscape is likely to have an emphasis on stability, with institutions being given much lower leverage ratios and investment banks supervised more tightly.
Key trends over the past 20 years, such as deregulation, are likely to be 'reversed, slowed down or modified severely'. [email protected]
World Economic Forum in Davos
</TR><!-- headline one : start --><TR>Reform role for SWFs <!--10 min-->
</TR><!-- headline one : end --><TR>They can provide capital to restore financial stability, says Dr Tan </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Alvin Foo
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
Dr Tan, speaking at a session entitled 'Scenarios for the Future of the Global Financial System', said that long-term investors like the GIC and other SWFs will grow in significance relative to leveraged investors like hedge funds because they are 'real money' investors.
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"-->DAVOS - LONG-TERM institutional investors like the Government of Singapore Investment Corporation (GIC) have a key role to play in the reform of the global financial system post-crisis.
That was the message that Dr Tony Tan, GIC's deputy chairman and executive director, delivered to the high-powered annual meeting of the World Economic Forum (WEF) in Davos yesterday.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>Reforms can go wrong: Three potential risks
REFORMING the global financial system will be a challenging enterprise that can easily go wrong, according Dr Tony Tan, deputy chairman and executive director of the Government of Singapore Investment Corporation (GIC).
That is because the reform has to be international if it is to be effective, as many key financial institutions are globally interconnected, large and highly complex.
RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>He said that such investors, which include the world's sovereign wealth funds (SWFs), are important in two ways.
Firstly, they will be important providers of capital to battered financial institutions and companies, now that other key investors - such as highly leveraged hedge funds and private equity funds - have been severely damaged by the crisis.
And because they will be important players in the recapitalisation of these institutions, they should therefore give inputs to the central banks and governments that are designing new regulations to prevent the problems that led to the financial meltdown.
Speaking at a session entitled 'Scenarios for the Future of the Global Financial System', Dr Tan said that the nature of the economic crisis warrants new thinking.
Stabilising the financial system has involved extensive government intervention, with taxpayers taking over distressed assets.
'Governments and central banks are likely to end up taking over and owning large swathes of assets from distressed holders as part of the deleveraging process,' said Dr Tan.
A significant portion of these assets may be of good quality but undervalued as institutions cannot hold on to them.
Governments will eventually need to sell off such assets on a massive scale to reduce debt and exit businesses better managed by the private sector.
This will 'inevitably need to involve long-term international institutional investors as key players', he added.
Here, long-term investors like the GIC and other SWFs will grow in significance relative to leveraged investors like hedge funds.
This is because they are 'real money' investors, said Dr Tan. On the other hand, leveraged investors tend to borrow heavily to finance their investments.
Indeed, sovereign wealth funds, including GIC, have gained a global profile over the past year after ploughing billions of dollars into distressed banks like UBS and Citigroup.
He predicted that these 'real money' investors will play a major role in stabilising the financial system given their large and growing asset bases and their long-term investment horizons.
Dr Tan said: 'This would contribute to stabilising financial and household sector losses, thereby helping to restore both credit creation and demand in the real economy.'
As a result of their larger role as capital providers, GIC and other large investors can, and should, play a key role in designing the new financial system that will surely follow the crisis.
He said their input can greatly help markets to function well, and enhance global coordination while minimising the risks of over-regulation and protectionism.
Shaping the financial regulatory system has mainly been the purview of governments, central banks and heavy-hitting investment banks but Dr Tan now sees a need for a broader consensus.
He said large institutional investors and SWFs can provide useful inputs to 'help guard against the danger of financial protectionism'.
Elsewhere in his address, Dr Tan also emphasised the need for a coordinated global effort in redesigning the post-crisis financial world.
Financial institutions are so interconnected these days that any reform of the current regulatory system will need to be international to be truly effective, he added.
Existing organisations such as the Financial Stability Forum and International Monetary Fund will be crucial in leading and coordinating the new system.
Looking into the future, Dr Tan said that the new financial landscape is likely to have an emphasis on stability, with institutions being given much lower leverage ratios and investment banks supervised more tightly.
Key trends over the past 20 years, such as deregulation, are likely to be 'reversed, slowed down or modified severely'. [email protected]
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