Financial System of Singapore-Free-Samples-Myassignmenthelp.com

Question: Discuss about the Strength and Opportunities in the Financial System of Singapore. Answer: Singapore has a well-regulated and highly developed financial system dominated by domestic banks, international banks and many non-bank services. The financial authorities of one of the largest financial center pay special attention to complying with international standards to maintain the integrity and stability of the system. Although the current regulation of the country is exceptional, however the country is exposed to much domestic and financial risk (Anand et al. 2013). In view of the risk present amidst best regulation and supervision standards, the critical essay provides useful insight into the strength and weakness of the financial system of Singapore and how this has been managed till date. Singapore has been regarded as an attractive destination for financial capital flow. The strength of the system is realized from the viability of its framework that can easily manage risk. The viability of the system has enabled Singapore to sustain financial growths for years. Since 1960s, the financial centre of Singapore is effectively managing funding roles and creating employment opportunities at all levels. The capital market promotes cross border trade and foreign direct investment too. All these factors indicate that the role of the financial framework in financial stabilization (Wu and Ramesh 2014). However, despite setting a high benchmark, it cannot be denied that there are many areas of attention and improvements in the system too. For instance, the operating conditions for banks are weak and this may escalate the risk related to bank assets and profitability. Secondly, growth is mostly seen in regional market, which might act as a major limitation for Singapores financia l system (Angela Teng 2016). The strength of the dichotomized financial system of Singapore can also be understood by reviewing the regulatory rules and prudential safeguards of the country. The continuous evolution of the financial framework helped to create a liberalized environment and effectively manage capital mobility and market operations too. Another strength of the financial system is that strong crisis management and resolutions arrangements in the country. Singapore has all legal framework and tools in place to coordinate activities and share information. However, there is still room for improvement in this area to because stagnation may risk financial growth and stability of the market. Woo, J.J., 2016 suggest that strengthening of the system is necessary to promote operational independence and efficiently implement financial resolution strategies. The financial centres of Singapore have distinctive features that provides them advantage over other centers. Firstly, despite changes in financial structure, the financial sector is mainly dominated by banks. Hence, important banking system asset at least for domestic market is at good hands. However, this point reflects the weakness of Singapore in terms of acquiring foreign banks. Singapore has limited all reforms and strengths to domestic banks only and this is the reason why foreign bank branches stay away from establishing operations in countries like Singapore, which has a regional focus (Rodan 2016). The critical analysis of financial strengths in international market strongly reflects that Singapore needs to pay attention to financial markets too. Despite strength of the economy, many risks to financial stability of the country has also emerged in recent years. For instance, the rise in real estate prices has had an impact on the bank loan uptakes and lending activities. Although the domestic bank activities of the country is expanding, however the credit and liquidity risk is increasing. So, it is doubtful regarding how far stability can be maintained if current weakness is not addressed. If Singapore looks ahead in the future, other additional risk is looming in the financial market too. This is because Singapore continues to have weak global demand since a long time (Chen Kang 2017).Hence, if they really want to boost their economic growth, they need to take strategic steps towards global demand too. If actions are not taken at the right time, it would not only hurt economic growth target, but also lead to adverse outcome for banking sector too. The net funding of Singapores bank is lower than other countries. The financial system of the country is highly interconnected and rise in foreign banks will affects financial performance of parent banks too. So, liquidity management will be a challenges for the country. However, despite the evidence of potential risk in financial market, Rodan, (2016) gives the contrary viewpoint that Singapore is resilient to many risks. This has been said because of the financial soundness of major domestic banks. This would help offset many losses. The essay gave a critical discussion about the strength and opportunities in the financial system of Singapore. The essay presented the strength of the system in sustaining growth for three decades and maintaining the stability of the system. However, the identification of weakness exposes the key present for the system in future too. For instance, it is still dominated by domestic banks and focus on international presence and global demand is still low. Hence, working towards improvement and management of future risk is considered important References Anand, K., Gai, P., Kapadia, S., Brennan, S. and Willison, M., 2013. A network model of financial system resilience.Journal of Economic Behavior Organization,85, pp.219-235. Angela Teng. 2016. Outlook negative for Spore banking industry: Moodys. Todayonline.com. Retrieved 19 August 2017, from https://www.todayonline.com/singapore/moodys-lowers-outlook-singapore-banking-industry-negative Chen Kang, T. 2017.Singapores Dichotomized Financial System. Retrieved 19 August 2017, from https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.200.5966rep=rep1type=pdf Rodan, G., 2016.The political economy of Singapore's industrialization: national state and international capital. Springer. Woo, J.J., 2016.Business and politics in Asia's key financial centres. Berlin: Springer. Wu, X. and Ramesh, M., 2014. Market imperfections, government imperfections, and policy mixes: policy innovations in Singapore.Policy sciences,47(3), pp.305-320.