Article – How Singapore became a Global Financial Center

Eduardo Vieira

Financial Markets

Gonçalo Doellinger

Financial Markets

Singapore is a city-state with an area of just 734 km², located south of Malaysia, from where it succeeded in 1965, and bordering the Strait of Malacca to the west, the Singapore Strait to the South and the South China Sea to the east. The country has a multicultural population, with over 20% of its 5,5 million inhabitants being non-residents, and having four official languages: Malay, Mandarin, English, and Tamil – English is the main one. In terms of politics, although Singapore is a democracy with multiple parties and free elections, it has been governed by the People’s Action Party (PAP) since its independence, whose control over politics and society is substantial. 

The country has mesmerized the world with its economic transformation, growing from a GDP of roughly USD 918 million to USD 467 billion between 1965 and 2022 and from a GDP per capita of USD 511to USD 83 thousand in the same period.

One of the most important contributors to this remarkable achievement has been the financial sector, which represents 13,5% of the country’s GDP. In fact, Singapore has very high activity across a wide range of financial industries:

At the end of 2023, there were around USD 3,4 trillion in assets held by 132 commercial banks, of which only 6 were local. There were also 217 insurance companies established in the country, with net premiums related to general insurance totaling USD 2,1 billion.

As of 2022, the country had USD 3,6 trillion worth of Assets Under Management, and 1194 registered and licensed fund management companies, up from 1108 in the prior year. Three quarters of the funds managed were sourced from outside Singapore and 88% were invested outside the country, reflecting the financial center’s position as a bridge for investors seeking the high-growth opportunities available in the Asia-Pacific Region.

New corporate debt issuances totaled USD 141 billion in 2022, of which 73% were denominated in USD and 15% in SGD, and outstanding corporate debt arranged by financial institutions in Singapore was valued at USD 379 billion. Additionally, USD 7,5 billion worth of all bonds issued were classified as green, social, sustainability, sustainability-linked, or transition bonds (GSS+), in line with the city’s emphasis on the importance of green finance. 

The daily trading volume in FX instruments averaged almost USD 1 trillion in 2022, making Singapore the largest FX center in Asia-Pacific and the third largest in the world. Also, the gross market value of OTC derivatives was USD 20,7 trillion in 2022, driven primarily by activity in interest rate derivatives.

Additionally, Singapore is ranked as the number one financial center in the Asia-Pacific region and number three financial center in the world, surpassed only by New York and London. It also holds either the 2nd or 3rd place in assessments of business environment, human capital, infrastructure, financial sector development, and reputation.


But to what does Singapore owe all this success?

To begin with, Singapore is notorious for its pro-business regulatory environment, which allows firms to quickly and easily set up their operations in the country. The processing of license applications for activities in the capital markets, banking, insurance, and payments sectors, for instance, is expected to take only between 6 weeks and 4 months. In addition, the Monetary Authority of Singapore (MAS), which is the country’s main financial regulator, has developed a Financial Sector Development Fund, which provides tax incentives as well as grants to financial institutions that establish or expand their operations in the region.


Politically, the country is very stable, having had the same governing party since its independence, a key factor for attracting companies. Additionally, the government has deliberately fostered the development of the financial sector by identifying financial markets with high growth potential and taking actions to expand them. For instance, this happened in the 1980s when, after recognizing the growth prospects of the Asset Management industry, the government took measures such as providing fund managers tax incentives and internationalizing the Singapore Dollar.

The city-state’s geography has very deeply affected the development of its financial sector. Because of its location, when Singapore was a British colony, it was established as a trading post, leading to the creation of financial services such as currency exchange, maritime finance, and shipping insurance. In addition, the proximity to fast-growing economies, especially China, has brought in large amounts of foreign funds from people seeking to invest in the region and from the growing number of high-net-worth individuals in surrounding countries. That is reflected in 76% of funds managed in Singapore in 2022 being sourced from abroad.

Also, the technical complexity of jobs within the financial services sector means that a skilled workforce is one of the most important factors for a company deciding where to establish its operations. There is no shortage of skilled professionals in Singapore, which was ranked 2nd in the Global Talent Competitiveness Index 2023, aided by the country’s education system which ranked 1st in the latest PISA assessment, and by the MAS’ initiatives that aim to foster financial sector skills and expertise such as the Financial Sector Talent Development scheme and the Financial Scholarship Programme. Furthermore, the city’s emphasis on aspects such as cultural diversity, livability, and city brand has helped in attracting skilled professionals from abroad. Some examples of this are its advanced infrastructure both in terms of transport and Information and Communication Technology (ICT), its low office rental costs, and the country’s pro-environmental attitude, which is reflected, for example, in the MAS’ green finance initiatives.

With that in mind, what does the future hold for Singapore’s financial sector?

It is expected that Singapore’s financial sector will keep relying on its already established industries.

However, emerging markets such as the FinTech industry as well as markets for RMB-denominated financial instruments are likely to play a larger role in the future. These arguably stand as the greatest opportunities for the differentiation of the city’s economy.

FinTech is short for financial technology, englobing areas such as mobile technology, artificial intelligence, blockchain, and big data analytics to improve and automate financial processes. The government is strongly supporting Fintech start-ups and also the FinTech industry at large, by introducing large subsidies and incentives to stimulate its growth. The industry hit a three-year high of USD 4,1 billion invested across 250 deals in 2022, a 22% increase when compared to 2021. However, Singapore’s emergence as a FinTech hub can cause long-term problems to its mainstream financial sector, as FinTech start-ups often offer more convenient, accessible, and cost-effective solutions than regular banks and financial institutions as providers of financial services.

Furthermore, with China’s aspirations of economic growth and currency internationalization, Singapore should become an important point of connection for the trading of RMB-denominated investments and financial instruments. The total value of RMB deposits in Singapore has been rapidly and consistently rising, almost doubling from RMB 102 billion in 2020 to RMB 202 billion in 2023. It is expected that this sector will evolve, going through major innovation processes, and that the concentration of Chinese banks and financial institutions in Singapore will significantly increase.


In conclusion, the development of financial services in Singapore is rooted in its geographical location. In addition, pro-business regulations, a stable and intervening government, and a solid system for developing and attracting professional expertise have built on this advantage to help the country become one of the leading financial centers in the world. If Singapore keeps up the work it has been doing while embracing the new growth opportunities presented to it, we can surely envision a bright future ahead for the country’s financial sector.


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