Singapore - Banking and securities

Singapore was founded as a trading outpost by Raffles of the East India Co. in 1819. The country's rigid development was closely linked to the government's efficient financial management. Conservative fiscal and monetary policies generated high savings, which, along with high levels of foreign investment, allowed growth without the accumulation of external debt. The banking system was open to foreign banks in the late 1960s. In 1988, Singapore had foreign reserves worth about $533 billion, which, per capita, put it ahead of Switzerland, Saudi Arabia, and Taiwan. Many sources of finance are available to organizations doing business in Singapore. The Monetary Authority of Singapore (MAS) requires banks to observe its policy of discouraging the internalization of the Singapore dollar. The MAS performs the functions of a central bank, except for the issuing of currency. The Board of Commissioners of Currency deals with currency issues. The MAS seeks to strike a balance between supervision on the one hand, and development of the financial markets on the other.

Singapore has not encouraged the freewheeling financial services culture of Hong Kong; nor has it resorted to a divigiste approach, as in South Korea or Taiwan. Until quite recently, Singapore has tried to enjoy the best of both worlds. This is now starting to change, as Singapore's own major banks, long regarded as complacent due to their domestic oligopoly, are beginning to venture overseas. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $20.1 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds— was $101.0 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was1.99%. As of 1999, Singapore had more than 700 financial institutions, including approximately 230 commercial and merchant banks, 142 of them commercial banks. Some 9 of the 31 banks with full banking licenses were locally incorporated; the remainder were branches of various overseas banks. Since 1971, the government has sought to attract representation by a variety of foreign banks in terms of countries and geographical regions. Most of the new foreign banks allowed into Singapore have been offshore banks that have concentrated on foreign-exchange transactions. The Post Office Savings Bank (POSBank) is the national savings bank (est. 1877). Thirteen commercial banks have restricted licenses, and 98 banks operate offshore. Singapore's four largest banks: DBS Bank, United Overseas Bank (UOB), OCBC Bank, and Overseas Union Bank Ltd. (OUB) had a 90% jump in profits in 1999 over 1998, recovering from the financial crisis quickly.

Over 350 companies are listed on the Stock Exchange of Singapore. In October 1992, the Kuala Lumpur Stock Exchange severed all links with the Singapore Stock Exchange. All the Singapore stocks moved to the Singapore exchange and the Malaysian companies moved to the Kuala Lumpur Stock Exchange. As of mid-1999, the SES had a total market capitalization of $130 billion.

The Singapore International Monetary Exchange (SIMEX) opened in 1984. SIMEX traded, as of the end of 1985, futures contracts in gold, Eurodollar time deposit interest rates, and US/Deutschemark and US/yen currency exchanges. Trading in Japanese stock index and sterling futures began in 1986. In 1989, SIMEX also became Asia's first energy market with the introduction of the High-Sulphur Fuel Oil futures, the world's most active contract of its kind. In 1999, SIMEX achieved its second highest annual volume of 25.8 million contracts. It was voted International Exchange of the Year in 1989, 1992, 1993, and 1998.