Singapore's regulatory environment drives financial institutions to do business

94% of survey respondents believe Singapore's liberal investment regimes and regulatory frameworks encourage investors.

According to financial institutional professionals, Singapore’s regulatory environment is a driver for doing more business in the jurisdiction. Singapore was ranked first amongst Asia Pacific countries as having a regulatory environment that encourages inward investment for financial institutions. These were the highlights of an Asia Pacific report released by an international legal practice, the Norton Rose Group.

• 94% perceived Singapore’s regulatory environment as a driver for financial institutions
• 78% perceived Hong Kong’s regulatory environment as a driver for financial institutions
• 56% perceived Australia’s regulatory environment as a driver for financial institutions
• 94% perceived China’s regulatory environment as a barrier for financial institutions
• 83% perceived India’s regulatory environment as a barrier for financial institutions
• 77% perceived Indonesia’s regulatory environment as a barrier for financial institutions

In the cases of Singapore, Hong Kong and Australia, respondents see the regulatory regimes as drivers of growth rather than barriers. The perception of these countries underlines the opportunities for regulatory arbitrage.

Jake Robson, corporate partner, Norton Rose (Asia) LLP, Singapore, commented: “Of all of the countries covered by this question, Singapore fares the best as far as having the most investment-friendly regulatory regime is concerned. Singapore is often held up as having one of the most liberal investment regimes and regulatory frameworks in Asia, if not the world, whilst still having an excellent reputation for the sophistication, impartiality and efficiency of its regulatory bodies.”

Wilson Ang, Of Counsel, Norton Rose (Asia) LLP, Singapore, commented: “The clearly overwhelming view that the regulatory environment in Singapore is a major driver of business demonstrates that strong regulation can be compatible with increased business dealings as long as the regulatory regime is clear, transparent and predictable. The Singapore regulator’s measured response resistance against knee-jerk reactions and populist measures in the midst of the financial crisis have won over the confidence of financial institutions.”

Phillip John, financial institutions partner, Norton Rose (Thailand) Limited, Bangkok, commented: “While these results are consistent with what our clients tell us, they do not necessarily mean that those financial institutions will shy away from doing business in jurisdictions where the regulatory environment is perceived as a barrier. Other factors may make those jurisdictions attractive. It does though demonstrate clearly the need for the financial institution and its advisers to understand fully the regulations and regulatory environment so as not to fall foul of any of the regulations.”

Hong Sun, Of Counsel, Norton Rose LLP, Shanghai commented on China: “Since its accession to the WTO, China has been rapidly improving its regulatory environment in many respects including consistency, transparency and filling in legal loopholes. While barriers naturally still exist, foreign financial institutions are now granted far more access to the China market than a mere decade ago and this looks firmly set to continue. As China becomes more entrenched in the global business community, she will, and has begun to, treat foreign investors in a way similar to how she would like to be treated abroad. The Chinese approach to regulatory openness is still a cautious one, though, due to a combination of inexperience and care not to repeat the mistakes of others as well as the fact that China started recently from practically a blank slate. China wants to play it safe as far as her immense growth allows.”

The report, Global Financial Recovery: A Matter of Perspective, sixth in a series, released by Norton Rose Group details the views of global respondents from a range of global financial institutions, including banks, insurance companies and fund managers. The survey was undertaken by 314 global respondents and 62 Asia Pacific financial institutional professionals. The questions were fielded between 13 July and 17 September 2010 and answered by email and telephone.