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The Minister for Trade & Industry and Deputy
Chairman of the Monetary Authority of Singapore (MAS) today moved the
Banking (Amendment) Bill ("the Bill") for first reading in Parliament. |
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The Bill will be read a second time and
discussed at the next available Parliamentary sitting. |
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OVERVIEW |
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As part of its on-going review of the
banking regulatory and legislative framework, MAS is introducing several
new policies and measures to strengthen prudential safeguards,
facilitate risk-based supervision, provide banks with greater
operational flexibility and update regulations. |
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MAS has consulted the industry on the major
policy changes and regulatory measures. A draft Bill was also released
for public consultation in July 2006 and the feedback received was taken
into account in finalising the Bill. |
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The consultation papers and MAS' response to
the public consultations are published on its website. |
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The enactment of the Bill will give effect
to these policies and measures. The key changes in the Bill are
summarised as follows: |
a Strengthening Prudential
Safeguards
- revision of methodologies for limiting
large exposures and related party exposures
- introduction of an asset maintenance
regime
- amendment of the priority ranking of
deposit liabilities of a bank
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b Enhancing MAS' Role in Bank
Resolution |
c Facilitating Risk-Based
Supervision and Allowing Operational Flexibility of Banks
- enhancement to the liquidity risk
supervision framework
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d Expanding the Regulatory Scope
for Credit Card Issuance |
e Updating Regulations
- lifting the statutory reserve fund
requirement
- qualification of the restriction on
the use of the word "bank"
- flexibility for MAS to prescribe what
constitutes a deposit
- revision of rules on the disclosure of
information
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STRENGTHENING PRUDENTIAL SAFEGUARDS |
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Several measures are proposed to strengthen
the prudential safeguards for the protection of depositors. |
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Revision of methodologies for limiting
large exposures and related party exposures |
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Currently, the Banking Act ("the Act") sets
prudential limits on credit facilities extended by banks to a single
borrower or a group of related borrowers. It also sets limits on
unsecured credit facilities to parties related to the bank. |
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The Bill introduces a number of changes to
ensure that the prudential limits remain relevant and are in line with
international best practice. |
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The first key change is to apply the limits
on all exposures (including equity and off-balance sheet exposures),
instead of only credit facilities, to a single counter-party or group of
related counter-parties posing a single risk to the bank. |
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The second key change is that MAS will
recognise some common forms of credit risk mitigation adopted by
banks. |
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To reduce the risk of contagion and
non-arm's length transactions, the current limits on lending to
related corporations will 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. |
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The details of the revised
exposure-based limits will be set out in a Notice to be issued by
MAS at a later date. |
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Introduction of an asset
maintenance regime |
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The Bill introduces a requirement for
foreign full and wholesale bank branches to maintain a minimum
level of eligible assets in Singapore in proportion to their
liabilities. |
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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. |
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Such a requirement would help to
improve the recovery of assets from a failed foreign bank branch
in Singapore to meet the claims of Singapore depositors. |
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In line with MAS' risk-based approach
to supervision, a higher asset maintenance requirement may be
imposed on banks that pose greater supervisory concerns. The
details of the asset maintenance regime will be set out in a
Notice to be issued by MAS at a later date. |
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More..... |
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Source:
www.mas.gov.sg Media Release 8
Nov 2006 |
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Related Article: |
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The Banking (Amendment) Bill passed |
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FrontPage Edition: Tue 14 November 2006
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