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Hong Kong and Singapore: How tough is enough?

Asia's two leading financial centres, Hong Kong and Singapore, are competing as gateways to the region. They're also learning to cooperate to keep their markets clean. But maybe they're acting too tough. Some bankers fault Singapore's Monetary Authority for responding more like the Delphic oracle than a regulator. Even Hong Kong's once laissez faire regime is getting over-paternalistic, say others, although the local vice of "rat trading" is not quite dead. David Shirreff reports.

Bankers based in Singapore tend to bad-mouth Hong Kong and vice versa. Even if they work for units of the same far-flung investment bank there's a kind of loyalty to the host centre.

"People in Hong Kong don't appreciate that they're part of China," whispers one Singapore-based Briton. "Can you imagine the implications? The sensible overseas Chinese are putting their money here, just to be safe."

"Singapore is paranoid about banking secrecy," counters a senior Hong Kong-based banker. "If you have a branch there you're not allowed to know who its depositors are. How can you exercise proper control?"

The two centres have a history of not-so-healthy rivalry. They each claim to be the Asian financial centre of choice, because of the quality of their financial markets, labour force, communications, and regulatory framework. Because they serve different hinterlands they haven't needed each other. And they have tended to exult in each other's misfortunes ­ the closure of Hong Kong futures exchange in 1987, or Singapore's Pan-Electric scandal of 1985.

But various events have forced them to be more cooperative. For example, the Mexican peso crisis in early 1995, which affected currencies and equity markets in Asia, prompted bilateral repo arrangements between central banks, including the Monetary Authority of Singapore (MAS) and the Hong Kong Monetary Authority (HKMA).

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