Ravi Menon, managing director of the Monetary Authority of Singapore , speaks during the IMAS Conference. (Photographer: Munshi Ahmed/Bloomberg)

The Quiet Singaporean's Loud Revolution

(Bloomberg Gadfly) -- His words don't carry a fraction of Fed Chair Janet Yellen's power to move markets; nor do his actions possess the strength of Haruhiko Kuroda's balance-sheet maneuvers at the Bank of Japan. He isn't an intellectual in the mold of economist Andy Haldane at the Bank of England, or Raghuram Rajan, the former governor at the Reserve Bank of India.

Yet this central banker from a nation of 5.6 million people, a policymaker who doesn't even set his own interest rates or issue a currency that's widely held overseas, is front and center of a revolution in global finance.

Ravi Menon, managing director of the Monetary Authority of Singapore since 2011, is the architect of the most audacious makeover of Singapore's financial system in 50 years. But unlike in 1968, when a newly independent Singapore merely wanted to be trusted with dollar deposits in the hours when New York was off to dinner and London slept, the game is different. In fintech, Menon isn't just looking to fill a gap. He wants Singapore to shine a light from which even the West can draw regulatory comfort.

Monetary czars are like parents. A good many outlaw parties because there would be drink and drugs -- or their central-banking equivalent, cryptocurrencies. Enlightened new-age guardians like Menon, however, are creating safe spaces for experimentation in "regulatory sandboxes." Do they worry about abuse? "I weigh up more disaster scenarios than you can think of," Menon told Neue Zuercher Zeitung. Yet, he's fine not regulating bitcoin, so long as intermediaries dealing in it follow anti-money-laundering rules.

Whether it's disrupting heavily paper-based trade finance with blockchain, or slashing know-your-customer costs by opening bank accounts with a shared utility, Menon gives fintech initiatives a stamp of respectability.

It's a far cry from a decade ago. In 2006, Andy Xie, Morgan Stanley's then chief Asia economist, characterized Singapore as the "money laundering center for corrupt Indonesian businessmen and government officials." (Xie promptly lost his job.) Now, it's the authorities in Jakarta who get worried when private banks in Singapore report suspicious transactions by Indonesian clients to the local police.

The 1MDB scam, in which billions were allegedly stolen from a Malaysian sovereign wealth fund, was a blow to the integrity of the Singapore banking system, where some of the money was parked. But Menon didn't let a good scandal go to waste. Not only did he send two Swiss banks packing, he's now working on a data-analytics system to scour through the 3,000 suspicious transaction reports financial institutions file each month, flagging money-laundering or terrorist-financing risks.

In Hong Kong, regulation is split between the Hong Kong Monetary Authority, the Insurance Authority, the Mandatory Provident Fund Schemes Authority, and the Securities and Futures Commission. In Singapore, MAS is the single, all-powerful watchdog. That allows Menon to juggle many balls at once: He can promise banks that he'll never ask them for the same data twice; police circular trading in stock markets; ready specifications for a common QR code; and come up with a law that would force all large e-money players to protect the account balances of Singapore residents but leave smaller firms free to grow.

In November, Singapore's second fintech festival saw 25,000 participants from 100 countries. Fintech and regtech startups are mushrooming, finally giving the city-state a way out of its dreary dependence on multinationals and a smattering of world-class government-linked companies.

"Singapore works," used to be the battle cry under Lee Kuan Yew, the nation's founding prime minister. He was lucky to have had a team of talented civil servants like Philip Yeo, who transformed boondocks into industrial clusters, and J. Y. Pillay, who turned a fledgling fleet into Singapore Airlines Ltd. Menon, a Singaporean civil servant of Malayali extraction, is keeping Lee's dream alive in finance.

While Hong Kong is the main money center for China, Indians and Indonesians will keep needing Singapore to hawk their debt.

Fintech is more of a global ambition, though. If Menon's gambit works, Singapore will stake a claim to be one of the alternatives to post-Brexit London.

But the correction in fintech hype that Menon sees coming sooner or later mustn't sweep away the good with the bad, he told Bloomberg television last month. Singapore also has to loosen the increasingly harsh restrictions on foreign talent it's imposed over the past several years.

Without more immigrants with ideas roaming the new fintech village at 80 Robinson Road -- a short walk from Menon's own office -- he'll have to content himself with being the quiet and efficient central banker of a small tropical island.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

©2017 Bloomberg L.P.

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