Monetary Authority of Singapore
1 Mdm Speaker, I beg to move, That the Bill be now read a second time.
2 The Payment Systems (Oversight) Act (PSOA) was first introduced in June 2006 for the oversight of payment systems and stored value facilities (SVFs) in Singapore. It provides the industry with regulatory clarity via a consistent and transparent framework. The PSOA also allows MAS to adopt a risk-focused approach to designate particular payment systems which are important for Singapore’s financial stability or public confidence. These designated payment systems are subject to closer regulatory oversight. Examples of designated payment systems include the Singapore Dollar Cheque Clearing and the Inter-bank GIRO systems.
3 This is the first amendment to the PSOA since 2006. These amendments seek to enhance MAS’ oversight over the designated payment systems. It will also align Singapore’s payments regulations with leading international standards, as set out in the Principles for Financial Market Infrastructures established by the Bank for International Settlements and the International Organisation of Securities Commissions.
4 MAS had consulted the industry on the proposed amendments last year. It considered all the views and feedback received, and took them into account in the amendments where appropriate.
5 Mdm Speaker, let me expand on the amendments to the Bill.
Exclude the Application of Parts V and VI of the PSOA to MAS
6 MAS is the operator, settlement institution and regulator of MEPS+, which is the New MAS Electronic Payment and Book-Entry System. MEPS+ is designated under the PSOA as it is a systemically important payment system used for real-time settlement of large-value financial transactions between financial institutions in Singapore. Systemic importance means that a serious disruption in the operations of the payment system could trigger, or transmit widespread disruption to Singapore’s financial system and could even impact the economy as a whole.
7 MAS is both operator and overseer of MEPS+. As Part V (Obligations of operators and settlement institutions of a designated payment system) and Part VI (Oversight powers over designated payment systems) of the PSOA are designed for commercial operators, this amendment will exclude Parts V and VI of the PSOA from applying to MAS. But MAS has a formalised internal arrangement for the oversight of MEPS+, where the oversight and operations functions are separate and have different reporting lines.
8 This arrangement is not unique to Singapore. Other central banks, such as the Bank of England and the Reserve Bank of Australia, that operate payment systems also rely on internal arrangements to ensure effective oversight over their payment systems. I would like to assure this House that MAS will continue to hold itself to similar standards as those expected of a designated payment system under the PSOA, through the internal oversight arrangement. The arrangement ensures that payment system oversight, internal audit and risk management assessments of MEPS+ are all conducted by departments separate from the MEPS+ operations department, each with direct reporting lines to senior management. A non-statutory oversight arrangement for central bank-managed payment systems is also consistent with international standards, as set out in the Principles for Financial Market Infrastructures.
Confidentiality of Reports Issued by MAS
9 The Bill will introduce a new section that provides an express provision for safeguarding the confidentiality of the information contained in the reports issued by MAS to the operator or settlement institution of a designated payment system. An example would be an MAS-issued inspection report of a designated payment system operator.
10 This provision will align the PSOA with best practice and will also allow MAS to enforce the confidentiality of its issued reports on recipients of these reports, such as an external auditor or consultant.
Expedite MAS’ Exercise of Emergency Powers
11 Lastly, the Bill will allow MAS to immediately exercise emergency powers in relation to an operator or settlement institution of a designated payment system during an emergency. An emergency situation can arise when the operator suddenly becomes insolvent, is unable to carry out its functions or continues to operate the system in a manner that is detrimental to its participants.
12 Under the existing emergency power structure, if the operator or settlement institution has failed to comply with a MAS-issued direction, a minimum period of time must pass before MAS can intervene. With this amendment, MAS will be able to take immediate regulatory action during a crisis as necessary to minimise any adverse impact on the participants of the designated payment system or the transmission of the crisis to the rest of the financial sector.
Conclusion
13 Mdm Speaker, let me conclude. This Bill seeks to strengthen MAS’ oversight over designated payment systems and align MAS’ regulatory framework for payment systems with international standards. MAS will continue to review its regulations and policies to ensure that they remain effective in preserving the safety, efficiency and the confidence of the public in Singapore’s payment systems.
14 Mdm, I beg to move.