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Sir, in
liberalising the SVF market, MAS will put in place several measures
to enable users or potential users to be better informed and more
discerning of the risks associated with the SVF that they intend to
purchase.
For the smaller
SVF schemes, MAS intends to require clear written disclosure to
users that the holder of the stored value is not subject to MAS'
approval under the Bill.
At the same time,
the list of widely accepted SVF will be published in the Government
Gazette and on the MAS website. MAS will also help SVF users make
more informed decisions through consumer education initiatives, such
as publications under the MoneySENSE financial education programme.
In addition, MAS
intends to issue guidelines to encourage the adoption of sound
practices in the SVF market.
Sir, I will now go through the main provisions of the Bill, starting
with those that relate to payment systems, followed by those that
pertain to SVF.
KEY PROVISIONS UNDER THE BILL
Information-gathering Powers over All
Payment Systems
Currently, MAS' payment
system oversight powers extend only to financial institutions. One
of the key provisions in the Bill gives MAS the discretionary power
to gather information from all relevant players in any payment
system in Singapore, including the operators and settlement
institutions. MAS will only exercise this power selectively and
will not be collecting information on all payment systems. The
information obtained will be used to monitor trends and developments
in the payment industry, and fine-tune MAS' oversight policy for
payment systems.
Designation of
Payment Systems
I mentioned earlier that
there is a broad spectrum of payment systems in Singapore, each with
unique functions and characteristics. MAS will identify and
designate payment systems that are considered important for
financial stability or for public confidence. Operators and
settlement institutions of designated payment systems will be
subject to MAS regulation, in addition to information-gathering
requirements.
Regulatory Powers
The type and intensity
of regulatory powers used, including the need to regulate entry,
will vary according to the scale and risk of each payment system.
In regulating entry to a designated payment system, MAS will consult
the affected parties and take into account the interests of all
stakeholders. Where competition issues are involved, MAS will
consult and work closely with the Competition Commission of
Singapore.
Supervisory Power
The Bill also gives MAS
supervisory powers over the players in designated payment systems,
including the payment system operators, settlement institutions, and
market participants. MAS will be able to inspect the operations of
designated payment systems and issue directions where necessary to
the operator and other market participants.
MAS' Approval for
the Appointment of CEO, Directors and Significant Shareholders
The Bill requires the
operator of a designated payment system to obtain MAS' approval for
the appointment of its CEO and directors, and for persons and
entities seeking to become significant shareholders, as they are in
a position to influence the management of the operator.
Notification
Requirements for Designated Payment Systems
Operators and settlement
institutions of designated payment systems are required to inform
MAS of pertinent matters or events that could affect the safety and
efficiency of the system. Timely notification of such occurrences
allows MAS to detect any signs of potential disruptions and to take
appropriate preemptive or mitigating measures.
The Bill also requires
an operator to notify MAS if it carries on or acquires substantial
shareholding in any business other than the core business of
operating a payment system, since non-core businesses could present
risks that may spread to the operations of the designated payment
system.
Emergency Powers
Even though MAS
will be supervising designated payment systems closely, disruptions
and failures within a system could still occur. An emergency
situation could arise where a designated payment system is prevented
from carrying out its functions, or is doing so in a manner
detrimental to the interests of the participants. In such a
situation, MAS will have powers under the Bill to take expedient
actions. MAS will be able to direct the operator or settlement
institution of a designated payment system to take necessary actions
to maintain or restore the safe and efficient operation of the
system.
Information-gathering Powers in Relation to Stored Value Facilities
I will now move on to
the provisions in the Bill that relate to SVF. With the
liberalisation of the SVF market, the scope of MAS' oversight powers
will be expanded accordingly. The Bill provides MAS with
discretionary information-gathering powers over holders of stored
value. This will apply to any SVF, whether single-purpose or
multi-purpose. As is the case for payment systems, MAS will only
exercise this power selectively and will not be collecting
information on all SVF. The information gathered will be used by
MAS to evaluate and fine-tune the oversight framework for SVF as the
market evolves.
MAS' Approval for
Widely Accepted Stored Value Facilities
As I stated earlier, the
new regulatory regime for SVF makes a distinction between those SVF
schemes where holders of stored value require MAS' approval and the
rest which can operate without approval. The Bill specifies a
threshold to provide a general distinction between these two
groups. The threshold of stored value holdings will be set at S$30
million.
The $30 million
threshold balances MAS' prudential concerns and the need to provide
consumers some protection on the one hand, with the need to allow
for a vibrant and competitive market on the other. It encourages
innovation involving smaller-scale SVF. Where the stored value of a
SVF exceeds $30 million, the Bill provides that the holder of the
SVF must be approved by MAS, and a bank licensed by MAS must also be
approved to be fully liable for the stored value of that SVF. The
$30 million threshold would mean that the existing nation-wide
multi-purpose SVFs in operation in Singapore, namely the NETS
CashCard and ez-link card would remain under MAS' regulation. Banks
would continue to be fully liable for the stored value for these
SVFs. The Bill provides that the threshold may be varied by MAS to
cater to future developments in the SVF market.
Obligation on
Non-widely Accepted Stored Value Facilities
With the
liberalisation of the SVF market, consumers would have to be aware
of and take responsibility for the risks relating to the SVF that
they have purchased or are intending to purchase. To enable
consumers to discern the risks relating to different SVF, the Bill
allows MAS to impose disclosure requirements. Specifically, MAS
will be requiring the market players involved in non-widely accepted
SVF, that is, the smaller schemes, to provide written disclosure to
potential users that the players are not subject to MAS' approval.
Exemptions
While the Bill is
drafted broadly to cater to a wide range of payment systems and SVF,
the provisions may not be applicable to every single payment system
and SVF since their features and characteristics may vary with time
and market developments. Hence, the Bill includes a general
exemption provision to enable MAS to exempt specific payment systems
or SVF from any or all provisions in the Bill.
CONCLUSION
Sir, in conclusion, the
Bill introduces a new regulatory framework for payment systems and
SVF in Singapore. The framework provides a consistent basis for MAS
to oversee payment systems and SVF in Singapore. It also
liberalises the SVF market to encourage competition and innovation,
and to better meet consumers' needs. This risk-based regulatory
framework addresses the need for safety and efficiency in payment
systems, and provides some protection for consumers using
large-scale SVF, while avoiding unnecessary or excessive regulation
of market players.
Sir, I beg to move.
Source:
www.mas.gov.sg News 16 Jan 2006
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MAS liberalises multi-function
stored-value card market
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