http://www.straitstimes.com/Breaking+News/Singapore/Story/STIStory_291092.html
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Oct 16, 2008
</TR><!-- headline one : start --><TR>Financial system stable <!--10 min-->
</TR><!-- headline one : end --><TR>Minister says MAS response has been measured but effective </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
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While Singapore cannot avoid economic weakness, the problems are coming from abroad rather than within Singapore and there is still plenty of confidence in the system, said Mr Tharman. -- BT PHOTO
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<!-- START OF : div id="storytext"-->FINANCE Minister Tharman Shanmugaratnam said yesterday that the Government has been 'alert and vigilant', since the financial crisis started, in making sure that Singapore's financial system continues to work well.
As long as it continues to function in an orderly manner, he added, the economy as a whole can go through the crisis 'without too much damage'.
To this end, the response of the Monetary Authority of Singapore (MAS) has been measured but effective so far, he told reporters at the unveiling of the Lee Kong Chian statue at Hwa Chong Institution yesterday afternoon.
As the global crisis gathered steam in recent weeks, the MAS has injected funds into the tight money markets, offered more liquidity to banks here and eased its exchange rate policy to encourage economic growth by shifting to a zero-appreciation stance on the Singapore dollar.
But the Government has not had to take 'major actions' domestically because the banking system is not in trouble and Singapore's banks are sound, said Mr Tharman.
While Singapore cannot avoid economic weakness, the problems are coming from abroad rather than within Singapore and there is still plenty of confidence in the system, said Mr Tharman.
Banks here are sound because they have not faced the two big problems hitting others worldwide: a lack of capital and a lack of liquidity stemming from frozen wholesale funding markets, said Mr Tharman.
'Our banks have enough capital and they're not dependent on the wholesale funding market, unlike banks in some other countries,' he said.
Banks in Singapore tend to lend money from the deposits they collect instead of relying on borrowings from other institutions, or wholesale funds, which could dry up and leave the banks in a liquidity crisis.
This confidence means that guaranteeing bank deposits - a move that Hong Kong took on Monday - may not be required in Singapore.
'That is something which we are studying very carefully and I'm not making a statement on that at this point,' he said.
'But from the point of our system, it is not necessary because there is no lack of confidence in our systems and that is something which the market acknowledges.'
Still, Singapore will have to study the implications of Hong Kong and a few other economies having guaranteed bank deposits, Mr Tharman added.
Experts have said that one concern is that money from wealthy investors could flow out of Singapore and into banks based in countries where deposits are government-guaranteed.
Turning to the economy, Mr Tharman said Singapore will have to expect a weakening of its economy along with the rest of the world.
'But I think we have the great advantage of a financial system in which the confidence is still high and the problems we are facing are external and not domestic,' he added.
Slumping export demand has already sent Singapore into a technical recession. It also resulted in the Trade and Industry Ministry lowering its full-year growth forecast last week to 'around 3 per cent', from 4 to 5 per cent previously.
Mr Tharman said the latest growth prediction 'is a fair position for now'.
'To be absolutely frank, forecasting is more inexact than it has ever been because the situation is changing by the week, indeed by the day in the United States and elsewhere,' he said.
'What is less important is the exact number you are putting out as much as the direction that is being conveyed. We do expect a weakening of the economy and we're preparing everyone for that.'
Asked about investors who had bought products linked to the now-bankrupt Lehman Brothers investment bank, Mr Tharman said the MAS has set out its approach clearly to provide avenues for recourse.
'Each of the banks has set up a panel headed by an independent person, respected individuals, so as to make sure this is a fair and serious process,' he said. 'This is not white-washing, it is a serious process of mediation.'
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