29 April, 2015
The Monetary Authority of Singapore (“MAS”) recently issued a response document to an earlier consultation paper proposing significant policies to the Banking Act (Cap. 19) (“BA”). The MAS articulated its policy position to feedback received on the consultation paper and also set out the proposed Banking (Amendment) Bill (“BA Bill”) for public feedback.
There are some key proposals which materially impact banks.
The first proposal requires banks to notify MAS of material adverse developments, including breach of laws, regulations, business rules or codes of conduct. This requirement will extend to any of the bank’s entities, including companies, subsidiaries and affiliates in Singapore. For banks incorporated outside of Singapore (for which MAS is not a consolidated supervisor), MAS will only require that they report if the bank has reasonable grounds to believe that the adverse development is likely to materially and adversely affect the branch in Singapore. This requirement of material impact to Singapore provides some measure of comfort to banks with regional or global presence, which had expressed concern that the requirement could potentially be too wide and difficult to monitor.
Another key proposal was for MAS to strengthen the control over key appointment holders of banks through implementing ‘Fit and Proper’ standards. The current provision in the BA stipulates that MAS may direct a bank incorporated in Singapore to remove key appointment holders (including directors, CEOs, and CROs) if it believes that it is necessary in the public interest or for the protection of the bank’s depositors. Under the proposed BA Bill, the respective bank may exercise such removal if the key appointment holders do not meet the standards set out in the Fit and Proper Guidelines (FSG-GO1). These standards include honesty, integrity, reputation, competence and capability.
Under the BA Bill, banks incorporated in Singapore must also notify MAS as soon as they become aware of any person who has become their substantial shareholder or controller without seeking the prior approval of the Minister-in-charge of MAS. The BA Bill also requires these banks to immediately notify the MAS of any material information, which negatively affects the suitability of the substantial shareholder or controller. These proposed provisions will help strengthen the ‘fit and proper’ rationale while giving banks more transparency in acquiring direct information of these substantial shareholders and controllers.
The other proposed provisions in the BA Bill cover provisions pertaining to the information furnished by banks, the implementation of risk management controls, and other fine-tuning provisions including a more nuanced approach for MAS to declare bank holidays. The extension of MAS’ oversight powers will be implemented in hopes to enhance Singapore’s banking regulatory framework.