Bank regulation has improved but some areas need more work, says Ravi Menon

BANK regulation has made good progress since the global financial crisis and implementation of the reforms to strengthen banking resilience and financial stability has been generally good, but some areas need more work and some jurisdictions need to close the gaps.

The point was made by Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), who said this in his keynote address at the symposium on Asian banking and finance in San Francisco, the United States, on Monday.

Mr Menon said overall, the reforms have helped to make banks safer and more resilient.

As Basel III capital reforms are finalised, he said "we must ensure that banks are not only safe but also serve their purpose of supporting the economy".

Regulators should be mindful of the effects of low profitability on banks' ability and willingness to lend, mindful not to increase significantly the overall level of capital requirements on banks even as the capital rules are being refined, and also mindful not to unduly penalise lending to important segments of economies, like trade and small and medium enterprises (SMEs), even as governments address the limitations in banks' internal models.

If carried out right, there would be more progress than ever before, with a banking system that is safe yet purposeful, resilient yet dynamic, he said.

The banking system would also be robust in the face of business cycles and market volatilities, and would support economic growth and create opportunities for individuals and enterprises, Mr Menon said.