Some unusual rumblings have been heard from Singapore recently. In July the resignation was announced of Koh Beng Seng, deputy managing director of the Monetary Authority of Singapore (MAS) and reckoned to be the country's hard man of financial regulation. Then the prime minister persuaded him to withdraw his resignation and asked him to join a committee on banking deregulation. Behind the scenes, a furious debate is raging about the kind of financial centre Singapore should be.
The 46-year-old boyish-looking and bespectacled Koh is reputed to be the country's most feared regulator. Bankers give him high marks for intelligence, integrity and dedication to his job but low marks for humility, social skills and flexibility. One banker sums up the views of many in the financial community when he says of Koh: "He's too unbending. His worst attitude is he thinks all of us are crooks; he looks down on us and he's very arrogant. He's like a central administrator who thinks he's 100% right and leaves no room for dissenting views."
Koh's boss, finance minister Richard Hu, defends him, pointing out that while his style may be unpleasant he has "built up a very strong edifice which has given Singapore a very powerful image as a safe haven". In the more than 15 years Koh has been in office, there has been no bank failure that has resulted in the loss of local depositors' money. Although the collapse of Barings has dented the republic's reputation somewhat, no-one in Singapore was out of pocket. Koh took particular pride in the fact that the monetary authority screened out the Bank of Credit & Commerce International, and thus prevented the sort of damage it inflicted on other centres, including Hong Kong.
Koh has ensured that local banks and broking firms meet high prudential standards and are more than adequately capitalized. Singapore banks have a capital-adequacy ratio of more than 12 and broking firms are instructed to maintain debt to net-adjusted capital of not more than five times, four times lower than the requirement in Hong Kong. But critics charge that the authority's heavy-handed approach to regulation has stifled innovation and its tendency to micro-manage businesses has raised the cost of compliance for institutions. A director of a stockbroking firm observes: "Koh Beng Seng is a control freak, he wants things just the way he wants them."
Stories abound on how proposals for new financial products and services have simply died because the MAS's guidelines are too vague and its officers will not commit themselves to an interpretation of the regulations. Since the authority's tolerance for errors or breaches of its rules is low, bankers say they would rather shelve an idea than risk incurring the regulator's wrath.
But no person or institution is beyond reproach. Koh also wields enormous power over the securities market and last year's failure of Amcol Holdings, a property and trading company listed on the stock exchange, has turned the heat on him.
Then there is the question of whether the MAS's tough stance is inhibiting Singapore's development as a financial centre. Although Singapore has established itself as the main banking centre for south-east Asia, excelling in foreign exchange and futures trading, it lags behind its northern rival Hong Kong in such areas as loan syndication, project finance, fund management, equities, debt and derivatives trading, and research. The city-state's father-figure, senior minister Lee Kuan Yew, has recently led calls for Singapore to become more like Hong Kong. Complaining of a lack of a "buzz" in the city's financial community, he has warned of the day when an agreement on financial services with the World Trade Organization (WTO) will open up the banking sector to foreign banks.
A five-man government committee - chaired by Lee's son, deputy prime minister Lee Hsien Loong - has been charged with making sure Singapore rises to the challenge of WTO liberalization. The committee is supported by an external consultant, Gerald Corrigan, former chairman of the New York Federal Reserve Bank and now a managing director of Goldman Sachs. He has been described by finance minister Richard Hu as "an old friend of ours" who is knowledgeable about new technologies, new instruments and their regulatory safeguards.
Koh, who did not wish to comment on any of the issues, is believed to have disagreed with some of the changes being proposed and to have taken offence at the fingers pointing in his direction. One question the committee is looking into is the internationalization of the Singapore dollar, which has been a sacred cow for Koh and his previous boss, former finance minister Goh Keng Swee.
The committee is understood to be examining several ways of opening up Singapore's domestic finance markets to outside competition. In addition to gaining equal access to Singapore dollars, foreign banks would like the freedom to sell a wide range of banking and investment products to retail customers and would relish the chance to join Nets, the country's pervasive electronic-point-of-sale system.
The committee is canvassing views from people in the industry on other deregulation issues such as whether limits on foreign ownership of banks and broking firms should be removed; whether to set up a separate agency distinct from the monetary authority to promote the industry; and whether to allow Simex, the financial futures exchange, to trade regional currency futures.
Days after the media reported Koh's resignation, Singapore's prime minister Goh Chok Tong issued a statement saying he had persuaded Koh to shelve it. Goh added that he would like him to help out in the review of the industry but didn't make clear if this amounted to the deputy managing director withdrawing his resignation. But most observers believe Koh's days are numbered. One broker says: "If they want to let a hundred flowers bloom, they will have to get rid of the bulldozer." Catherine Ong