SINGAPORE The United States and Europe need to stop acting unilaterally on financial regulation and align their rules more closely or else they risk undermining the global economy, Singapore's Finance Minister said on Wednesday.
"We need something closer to harmonization," Tharman Shanmugaratnam, who is also chairman of the central bank and a deputy prime minister, told Reuters in an interview.
"If you look at many advanced countries today, compared to five years ago, things have gotten more domestic and less international and that's a risk for the global economy whether it's financial regulation or other matters."
Regulators in Asia are increasingly concerned at the cross-border reach of regulation from the United States and Europe, especially their rules on derivatives trading and bank structures. They fear that these rules may clash with their own domestic regulation or make it harder for cross-border trading between banks from different parts of the world.
U.S. regulators are expected to finalize later this week how their rules on derivative trading will apply to cross-border trades. Asian regulators are hoping their own domestic rules will be recognized by the United States as being sufficient so that banks in their markets do not have to follow two sets of regulations or cut trading ties.
Tharman added that he believes the global financial sector is now reaching a point where it has seen enough new regulation and the focus should turn to tighter surveillance of the banking industry instead.
"If you look at all the regulatory initiatives that have been taken nationally and globally and add them up together, I think you've got to pause and refocus on supervision," he said.
"We've got to be careful not to always be fighting the last battle, you can't say for sure what the next crisis is going to be but there will be a next crisis and that's where supervision is critical."
The finance minister also said he supports the drive from the Group of Eight (G8) economies to improve tax transparency, but said more countries should be involved in their discussions.
"We have no problems conceptually and in principle with these new initiatives but implementation is critical and implementation must involve a serious discussion amongst a much broader set of players than the G8," he said.
Singapore serves as a low-tax base for many multinational companies' Asian headquarters, but Tharman rejects the notion the city-state wants to act as a booking centre for profits made in other countries.
"We have no economic benefit in Singapore from attracting profits from the rest of the world to take advantage of low taxes in Singapore, there is no domestic value added, and it's domestic value added that matters to us, mere booking of profits doesn't help us in any way."
Singapore, a major banking and wealth management centre, has been gaining ground on Switzerland but wants to avoid the harsh scrutiny its rival is facing from a crackdown on tax evasion and offshore secrecy by governments in Europe and the United States.
It said in May it will adopt new measures to make it easier to share details on potential tax evaders with other countries, including the United States, by signing up to a multi-lateral Organisation for Economic Cooperation and Development convention on information sharing.
Tharman said it is now imperative that all other countries sign up to the convention for it to effectively tackle tax evasion.
"It makes no sense in any case for Singapore to move alone because the money just flows from one place to another so that's been absolutely clear in our minds, there has to be a level playing field and we should all move together."