Singapore risk guidelines should aid risk exchange project

SINGAPORE – Risk management guidelines issued recently by Singapore regulators are an important step toward making Singapore a premier risk management centre in the Asia-Pacific region, the island state’s trade and industry minister, Tharman Shanmugaratnam, said in November.

And with that aim in mind, the Monetary Authority of Singapore (MAS) and the financial services industry are studying the feasibility of creating an Asia Risk Exchange (ARX) in Singapore. ARX would aid the exchange of risks between financial firms and the capital markets, Shanmugaratnam said.

The risk management guidelines were issued in late October by MAS, Singapore’s central bank and chief financial watchdog (see Operational Risk, November 2002, page 4). Financial services industry comment on the guidelines was due by November 30.

The guidelines cover the measurement and management of credit, market and liquidity risks, as well as internal controls that would help reduce operational risk.

Shanmugaratnam told the Singapore branch of ACI, the financial markets trade body, that ARX would enable banks to hedge residual portfolio and credit risks and allow insurers to insure catastrophic and sudden event risks.The capital markets could securitise ARX risks

ARX would primarily undertake risks and exposures that financial firms are unwilling or unable to assume individually, Shanmugaratnam said.

It should therefore complement rather than displace existing market players, he added.