Singapore, 31 Jul 2006...The Monetary Authority of Singapore (MAS) has released a consultation paper proposing several changes to the Banking Act. The changes are part of an on-going review of the banking regulatory and legislative framework.
2 The proposals seek to strengthen prudential safeguards, facilitate risk-based supervision, provide banks with greater operational flexibility, and update banking regulations. Key proposals include:
Revision of methodologies for limiting concentration risk and related party exposures. To ensure that prudential limits remain relevant and are in line with international best practice, MAS proposes a number of changes to section 29. Among others, the changes will apply limits on all exposures to a single counter-party or group of related counter-parties posing a single risk, instead of just on credit facilities as is presently the case. Existing limits on lending to related corporations will also be widened to limit the exposures of a Singapore-incorporated bank to its substantial shareholder group(s), and exposures of a bank in Singapore to financial entities in which the bank holds a major stake.
Establishment of an asset maintenance framework for foreign bank branches. The resolution of cross-border bank insolvencies is often complex and drawn-out, and there is usually uncertainty concerning the amount and speed of any recovery. To improve the recovery of assets from a failed foreign bank branch in Singapore to meet the claims of depositors, MAS proposes to require foreign bank branches to maintain a minimum level of eligible assets in Singapore in proportion to their liabilities.
Enhancement of MAS' role in bank resolution. To protect depositors and maintain stability in the financial system, MAS proposes that it be given wider powers in the resolution process to act expeditiously in resolving failed banks. These powers are in line with international best practice, and can only be exercised under pre-defined conditions. They include the ability for MAS to direct the sale of the business of a failed bank to another bank.
3 MAS invites interested parties to forward their comments on the proposals in the consultation paper and the draft Banking (Amendment) Bill. Both documents can be found on the MAS website. (Please click here to view the Consultation Paper.) The consultation period will end on 31 August 2006.