Singapore: a new Banking Act for a new era

Chris Hamblin

Editor

3 February 2015

The Monetary Authority of Singapore claims that it "is amending the Banking Act (“BA”) to strengthen its supervisory oversight over banks and to codify MAS’ current supervisory expectations and practices." This eye-catching claim on the part of the regulator to be a legislative body is belied later in the text of the relevant consultative document, however. At the back of the document is a draft of the Banking (Amendment) Bill which clearly states: "Be it enacted by the President with the advice and consent of the Parliament of Singapore..."

Having got off on a rather farcical footing, the MAS lists the new powers that it would like. These are:

the power to require any bank incorporated outside the island republic to be incorporated within it also;
the imposition of 'leverage' (debt) ratio requirements;
the imposition of minimum liquid assets or liquidity coverage ratios on banks;
the discretion to prohibit (or render null or restrict) transactions with related persons that are detrimental to depositors' interests;
the discretion to remove directors if they are not 'fit and proper';
the ability to require banks to notify it as soon as they become aware of any material information that may negatively affect the fitness and propriety of any officer whose appointment the regulator previously approved;
the power to penalise banks that fail to take reasonable care to ensure that the information they give it is accurate; and
the power to declare bank holidays.

The MAS will formalise somebody's (it does not say whose - perhaps it means its own) expectation that banks will keep up adequate risk management systems and controls. It will consult interested parties about regulations to set out the risk management requirements in due course.

The regulator also wants a 'safe harbour provision' to protect external auditors from liability arising from disclosure, in good faith, of confidential information provided to it. It does, however, want to be able to penalise auditors for their failure to discharge their statutory duties as set out in the bill. It also wants to be able to direct a bank to remove external auditors who have not performed their statutory duties to its satisfaction.

Today, the MAS requires every bank to seek its approval whenever it wants to open a new place of business or change the location of its existing place of business at which it conducts any type of banking business. The MAS wants to be able to require banks to seek approval for places of business at which they conduct certain non-banking activities (e.g. money-changing and remittance business).

The bill, in its 'white paper' form, proposes to repeal the existing law that makes bank directors jointly and severally liable for their banks’ losses arising from unsecured credit facilities.