Singapore’s Banking and Finance System

Table of Contents

1. Introduction………………………………………………………………1

2. Sectors contribution to the national economy………………………….1
   1. Wealth Management……………………………………………………2
   2. Job Market……………………………………………………………..3
   3. Foreign Direct Investment……………………………………………..3

3. Challenges facing the sector in the present and future…………………3
   1. Shortage of skilled talent………………………………………………3-4
   2. Cyber-crime…………………………………………………………….4
   3. Dependency of global economy………………………………………..4

4. Strategic Planning by This Sector In the Present and Future…………4
   1. Training and Education………………………………………………..4-5
   2. Product Innovation…………………………………………………….5
   3. Global Innovation………………………………………………………5

5. Conclusion…………………………………………………………………5-6

6. Reference List…………………………………………………………….7-8

1. Introduction

The banking and finance services sector is made up of institutions and markets that communicate through transactions using financial instruments such as debt instruments and equity instruments, for the aim of channelling funds for investment, and providing facilities, that includes payment and settlement systems for the financing of economic activities (Mishkin and Eakins, 2012). Singapore’s banking and finance system is among the best in the whole world. The banking and finance sector involve a wide range of financial services such as traditional lending and deposit-taking functions as well as corporate and investment banking activities. In 2005, there were 110 commercial banks, 47 merchant banks and 3 financial companies in Singapore’s financial sector. 6 banks in Singapore have been awarded Qualifying Full Bank Licences (Hidajat, 2008).

2. Sectors contribution to the national economy

There are a few sectors that contribute to Singapore’s economy. They are wealth management, job market and foreign direct investment.

1. Wealth Management

The first sector that contribute to the national economy is wealth management. Wealth management meaning can vary depending on the situation. In other words, wealth management is simply the latest synonym for investment management, asset management, or portfolio management. An immerse definition would be the detailed, coordinated process by which the personal financial affairs of busy, wealthy people are managed (Moehlman, 2004). Singapore is a leading wealth management centre not only in Asia, but also globally. The increasing wealth in Asia, and the focus on the Asian growth prospects have seen total assets under management in Singapore’s fund management industry from about S$280 billion in 2000 to S$600 billion today. Private banking assets under management has also been strong and growing with the unreliable feedback recommending Singapore private banking AUM averaging 20% per annum over the past few years to about US$200 billion currently (Ong, 2014).

2. Job Market

The second sector that contribute to the national economy is job market. Job market is a market in which employers search for employees and where employees search for job. There is no physical place for job market. In the job market, there is competitions and interaction between different labour forces. The job market can also grow or shrink depending on the labour demand and supply within the economy (Investopedia, 2010). Singapore’s government have been tightening job markets to favour local talent and reduce reliance on expatriates (CHIA, 2014). The job market in Singapore did a huge contribution to its economy. When there are more people working in the industries, they will bring in new ideas and increase the productivity level of the company, thus it will contribute to more sales and producing more profit. As a result, Singapore’s GDP will rise.

3. Foreign Direct Investment

The last sector that contribute to the national economy is Foreign Direct Investment. Foreign direct investment can be defined as an investing from one country into another it is normally done by companies rather than government. Foreign direct investment also involves establishing operations or acquiring tangible assets, including stakes in other businesses (Financial Times, 2015). Foreign investors set up their company in Singapore, they contribute to Singapore’s GDP by selling their products in Singapore. The stock of foreign direct investment in Singapore was $853.3 billion as at the end of 2013 (Singstat.gov.sg, 2015).

3. Challenges facing the sector in the present and future

There are challenges facing the finance and banking sector. They are shortage of skilled talent, cyber-crime and dependency of global economy.

1. Shortage of skilled talent

The first challenge is shortage of skilled talent. Shortage of talent is when there is less skilled and experienced people. This challenge affect a lot to the finance and banking sector as there are less talented people working in the industries. This affect a lot to the economy because if the employees are not talented they wouldn’t be able to create a fantastic job, thus resulting in a lower level of profitability and productivity. According to Hays, companies will continue to struggle to attract the highly skilled and experienced professionals they need in Singapore. The talent shortage in Singapore has reached a point whereby it is a distraction to the effective operation of business in the city-state (Reporter, 2014).

2. Cyber-crime

The second challenge is cyber-crime. Cyber-crime is closely connected to financial crimes. Financial crimes are usually bounded via the Internet it has a major impact on the international banking and financial sectors (Interpol.int, 2015). Cyber terrorist usually target someone that is working for the financial institution that they want to attack. The user is tricked to click on a link and a malicious software is downloaded. The software that they download is capable of capturing information within the actual organisation and send that information to third parties elsewhere in the world (Kerr, 2015). Cyber-crime are costing Singapore an expected S$1.25 billion, as law breakers get more brilliant in exercises going from business sector control to digital surveillance, as indicated by security report yesterday (Tan, 2014).

3. Dependency of global economy

The last challenge is dependency of global economy. Economic dependence is when the costs and revenues of a project is dependent on those of another (NASDAQ.com, 2015). Dependency of global economy can be defined as when the costs and revenues are dependent on the state of the economy globally. It affect the finance and banking sector because as the economy moves if it goes down, the revenue will go down too. Singapore is dependent on exports and has been affected by recent international crises. Given by its reliance on the external markets, the consistent test for policy makers is to be ahead of the competitors and worldwide forces. The nation’s financial strategies must be looked into and changed occasionally to adapt to emergencies and downturns, and to take advantage of the significant moves in the global economy (Internations.org, 2015).

4. Strategic Planning by This Sector In the Present and Future

There are strategic planning that can be adapted by the finance and banking sector. They are training and education, product innovation and global innovation.

1. Training and Education

Training and education refers to the method that companies use to improve their employees. Employees can be given training and education in order for them to perform better and have new ideas. When employees are more educated, they become more productive, thus it will contribute to the banking and finance sector. Singapore has a lot of financial institutes where employees or students can take on courses in order for them do deepen their studies about the finance or the banking sector in Singapore.

2. Product innovation

Product innovation is the introduction of a new good or services that is new or enhanced as for its attributes or intended uses. This includes huge changes in technical specification, components and materials, incorporated software, user friendliness or other functional characteristics. Financial innovation is making and promoting new financial products and services, developing new processes to facilitate financial activities (Mention, 2011). By promoting new financial products and services, the banking and finance sector will improve. Singapore’s financial industry has been growing in scale and expansiveness of activities and members. To meet the expanding requests of Singapore’s financial centre, there exist a vibrant ecosystem of flagship training and research centres and greater innovation in finance.

3. Global Innovation

Global innovation is expanding the finance and banking sector to other part of the world. With global innovation, the finance and banking sector will have more profit as it is now exposed to other parts of the world. By expanding the sector globally, the number of customers will increase and thus it will increase the profitability. Singapore’s OCBC bank has expanded its sector to other parts of the world and now it has become a very successful bank around Asia.

5. Conclusion

In conclusion, this reports talk about the banking and finance sector. There are contributions that contribute to Singapore’s economy, they are wealth management, job market and foreign direct investment. However, there are also challenges that is affecting the banking and finance sector. They are shortage of skilled talent, cyber-crime and dependency of global economy. There are also strategic plans that can be made by this sector they are training and education, product innovation and global innovation. The Monetary Authority of Singapore (MAS) supports the banking and finance sector by sustaining non-inflationary economic growth and a sound and progressive financial centre. MAS also act as the national bank of Singapore, including the behaviour of monetary policy, the issuance of currency, the oversight of payment systems and serving as banker to and financial agent of the Government. MAS also lead incorporated supervision of financial services and financial stability surveillance, manage official foreign reserves of Singapore and develop Singapore as an international financial centre. Singapore government is being optimistic about Singapore’s future. Singapore is seen as a prime location for wealth and fund managements by investors worldwide. The financial sector has been developing in the recent years, it has 16.9% growth in 2007. The market is expected to continue growing despite the recent economic turmoil (Ong, 2015).

Reference list

Mishkin, F. and Eakins, S. (2012). Financial Markets and Institutions. 7th ed. Pearson.

Hidajat, E. (2008). The Banking and Finance Industry in Singapore | JobsCentral Community – your friendly hangout for career topics and more!. [online] JobsCentral Community. Available at: http://community.jobscentral.com.sg/node/466 [Accessed 14 May 2015].

Moehlman, M. 2004, “What is wealth management?”, Dental Economics, vol. 94, no. 10, pp. 138-141.

Ong, C. (2014). Private Wealth Management Conference. [online] Mas.gov.sg. Available at: http://www.mas.gov.sg/news-and-publications/speeches-and-monetary-policy-statements/speeches/2006/private-wealth-management-conference.aspx [Accessed 14 May 2015].

Investopedia, (2010). Job Market Definition | Investopedia. [online] Available at: http://www.investopedia.com/terms/j/job-market.asp [Accessed 14 May 2015].

CHIA, Y. (2014). Singapore ‘top choice in Asia’ for professionals Most popular. The Straits Times, [online] p.1. Available at: http://newslink.asiaone.com/user/OrderArticleRequest.action?order=&month=06&year=2014&date=03&docLanguage=en&documentId=nica_ST_2014_31780394 [Accessed 14 May 2015].

Financial Times, (2015). Foreign Direct Investment Definition from Financial Times Lexicon. [online] Available at: http://lexicon.ft.com/Term?term=foreign-direct-investment [Accessed 14 May 2015].

Singstat.gov.sg, (2015). Statistics Singapore – FAQ on Foreign Direct Investment. [online] Available at: http://www.singstat.gov.sg/educational-corner/faq-on-foreign-direct-investment [Accessed 14 May 2015].

Reporter, S. (2014). Skilled talent shortage, extreme wage pressures to escalate further in 2015. [online] Singapore Business Review. Available at: http://sbr.com.sg/hr-education/news/skilled-talent-shortage-extreme-wage-pressures-escalate-further-in-2015 [Accessed 15 May 2015].

Interpol.int, (2015). Financial crime / Financial crime / Crime areas / Internet / Home – INTERPOL. [online] Available at: http://www.interpol.int/Crime-areas/Financial-crime/Financial-crime [Accessed 15 May 2015].

Tan, J. (2014). Report: Cyber crime costs Singapore an estimated S$1.25bn annually. [online] Techgoondu. Available at: http://www.techgoondu.com/2014/06/11/report-cyber-crime-costs-singapore-an-estimated-s1-25bn-annually/ [Accessed 15 May 2015].

Kerr, C. (2015). Cyber crime in financial institutions. [online] Cso.com.au. Available at: http://www.cso.com.au/article/556587/cyber-crime-financial-institutions/ [Accessed 15 May 2015].

NASDAQ.com, (2015). Definition of “Economic dependence” – NASDAQ Financial Glossary. [online] Available at: http://www.nasdaq.com/investing/glossary/e/economics-dependence [Accessed 15 May 2015].

Internations.org, (2015). The Economy of Singapore. [online] Available at: http://www.internations.org/singapore-expats/guide/16061-economy-finance/the-economy-of-singapore-16045 [Accessed 15 May 2015].

Mention, A. (2011). Innovation for Financial Services | Innovation Management. [online] Innovation Management. Available at: http://www.innovationmanagement.se/2011/09/13/innovation-for-financial-services/ [Accessed 15 May 2015].

Ong, C. (2015). The Booming Finance Sector. [online] Worksingapore.com. Available at: http://worksingapore.com/articles/industry_1.php [Accessed 15 May 2015].