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Source: www.mas.gov.sg |
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Second Reading Speech by Mr
Lim Hng Kiang, Minister for Trade & Industry and Deputy Chairman,
Monetary Authority of Singapore |
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Mr Speaker Sir, on behalf of the Senior
Minister, I beg to move that the Bill be now read a second time. |
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Over the past few years, MAS has
progressively liberalised the banking sector. At the same time, MAS has
also sought to implement a risk-based supervisory approach that moves
away from one-size-fits-all rules and allows for well-managed
risk-taking. |
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The measures have resulted in more choices
to consumers, new innovative products and competitive pricing. |
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With the free play of market forces and the
growing complexity and international nature of banking business, there
will also be new risks to be addressed. For example, depositors are
increasingly exposed to the risks of both local and foreign banks'
expanding international operations. |
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MAS continuously reviews and refines its
regulatory framework to ensure that it is robust and responsive, without
adding undue burden and cost to the industry; a framework that upholds
prudential standards and the interests of depositors, while fostering
the growth of the sector. |
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The Banking (Amendment) Bill is part of this
on-going process. It introduces several new policies and measures to
strengthen prudential safeguards, facilitate risk-based supervision and
provide banks with greater operational flexibility. |
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In preparing this Bill, MAS has consulted
extensively with the industry and the public on the policy changes and
the draft Bill. |
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The feedback received was carefully
considered, and incorporated into the Bill where practicable and
consonant with its regulatory objectives. |
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Mr Speaker Sir, I will now go through
the major amendments in the Bill. |
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STRENGTHENING PRUDENTIAL SAFEGUARDS |
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In terms of strengthening prudential
safeguards for the protection of depositors, I shall elaborate on
three main ones. |
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Revision of methodologies for
limiting large exposures and related party exposures |
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Currently, section 29 of the Banking
Act sets prudential limits on credit facilities extended by banks
to a single borrower or a group of related borrowers. It also
curtails unsecured credit facilities to parties related to the
bank. |
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These prevent the default of any
single borrower from seriously impacting the financial strength of
a bank. |
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MAS is introducing a number of changes
to ensure that the prudential limits remain relevant and are in
line with international best practice. |
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First,
instead of a limit based on credit facilities granted, the Bill
introduces a more comprehensive measure based on exposures, which
would include a bank's equity investment in, as well as other
transactions with a counterparty. |
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The second key change is that
MAS will recognise a bank's efforts in mitigating risks, by
allowing the bank to offset its exposures where these are secured
by qualifying collateral, or to substitute its exposures to a
counterparty with that of a credit protection provider of good
rating. |
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To reduce the risk of contagion and
non-arm's length transactions between a bank and a related party,
the current limit on unsecured lending to related corporations
will be widened to restrict the exposures of a bank incorporated
in Singapore to its substantial shareholder groups, and exposures
of a bank in Singapore to entities in which the bank holds a major
stake. |
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The industry will be given a two-year
grace period to make the appropriate adjustments for compliance
with the revised section 29. |
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Introduction of an asset maintenance
regime |
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MAS' liberalisation measures in the
last few years have brought about greater foreign bank
participation in our banking sector. |
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While the competition has added to the
dynamism of the banking sector, the banking system will
increasingly be exposed to risks arising from the foreign banks'
international operations. |
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Should a foreign bank fail, the
resolution of a cross-border bank insolvency will be complex and
drawn-out. The claims of depositors and creditors will be subject
to substantial uncertainty. |
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The revised section 40 aims to
strengthen the foreign bank regulatory framework by requiring
foreign full and wholesale bank branches to maintain a minimum
level of eligible assets in Singapore in proportion to their
deposit liabilities. |
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This 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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The asset maintenance requirement has
been carefully calibrated to balance prudential objectives with
banks' commercial interests, and determined after close
consultation with the industry. A six-month grace period will also
be given, for foreign bank branches to make necessary adjustments
to their asset allocations. |
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More..... |
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Source: www.mas.gov.sg
Media Release 22 Jan 2007 |
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Related Article: |
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-
Banking (Amendment) Bill - First Reading in Parliament |
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FrontPage Edition: Mon 22 January 2007
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