Singapore: MAS Consults On Proposed Amendments To Banking Regulations, Notices And Guidelines

On 2 December 2020, the Monetary Authority of Singapore ("MAS") issued a consultation paper (hereinafter referred to as the "December 2020 Consultation Paper") on proposed amendments to regulations, notices, and guidelines to support the implementation of the remaining provisions under the Banking (Amendment) Act 2020 ("BAA") that have not yet commenced. For more information on the BAA, which was passed by the Singapore Parliament on 6 January 2020, please refer to our earlier client update found here. In addition to the proposed amendments arising from the BAA, MAS is also consulting on the proposal to extend its composition powers to specified offences under the Banking Act ("BA") and Trust Companies Act ("TCA").

This update outlines the key proposals in MAS's public consultation.

I. Revision of methodology for computing the anti-commingling limits

In 2015, MAS had issued a consultation paper on amendments to various Banking Regulations, Notices and Guidelines to effect the proposed removal of the Domestic Banking Unit and the Asian Currency Unit ("DBU-ACU") divide. For more information, please refer to our earlier client update here. A further public consultation was also carried out by MAS in 2017 on the review of the anti-commingling framework for banks.

The December 2020 Consultation Paper is concerned however, with proposed amendments to the Banking Regulations relating to the computation of anti-commingling limits in connection with the removal of the DBU-ACU divide.

Under the existing Regulations 23F and 23G of the Banking Regulations, banks are required to comply with anti-commingling limits on their "capital funds" (which is defined based on the DBU-ACU divide). With the removal of the DBU-ACU divide, the concept of "capital funds" will no longer apply for banks incorporated outside Singapore. Instead, the anti-commingling limits for banks incorporated outside Singapore will be computed based on total assets.

MAS has therefore proposed to amend Regulations 23F and 23G to provide, among other things, that where a bank incorporated outside Singapore carries on prescribed private equity or venture capital business (under Regulation 23F) or prescribed non-financial business (under Regulation 23G), it must limit the total balance sheet asset value or total exposures (whichever is the higher of the 2) to the prescribed business to 1.5% of its total assets (less net interbank lending). Notably, the revised limits are calibrated at lower absolute levels than the current limits, as banks' total assets are usually significantly larger than their capital funds.

II. Cancellation and replacement of existing regulatory instruments for merchant banks

In 2019, MAS had consulted on proposals to consolidate the regulation of merchant banks ("MBs") under the BA upon removal of the DBU-ACU divide, and to migrate MBs from the current approval framework under the MAS Act, to a licensing regime under the BA. The new regulatory framework for MBs is now set out under the new Part VIIB introduced by the BAA, although Part VIIB has not come into force.

To implement the new Part VIIB, MAS has proposed to cancel the existing MB Directives, Notices and Guidelines and to replace these with the provisions in Part VIIB, as well as Regulations, Notices and Guidelines issued under the BA.

In particular, MB Notices which were empowered under the MAS Act will have to be cancelled and re-issued as they will now be empowered under the BA. The MB Notices which will be cancelled and re-issued due to changes in empowering provision(s) are as follows:

MAS has proposed to make amendments to the following notices and guidelines on account of the changes introduced under the BAA (including the new Part VIIB) as well as other drafting improvements:

MAS has also proposed to introduce the new subsidiary legislations and notices below in line with the implementation of the new Part VIIB:

For more details, please refer to Annexes A and B of the December 2020 Consultation Paper.

III. Extension of MAS's composition powers for offences in relation to privacy of customer information

In order to provide MAS with greater flexibility in pursuing appropriate and proportionate regulatory actions against instances of non-compliance, MAS has proposed amendments to prescribe the following offences under the BA and TCA, in relation to privacy of customer information, as compoundable:

1. For banks and MBs, the offence under section 47(6) of the BA in relation to the failure to comply with requirements to safeguard the privacy of customer information under section 47 (for MBs, the requirement under section 47 is applied by section 55ZI of the BA);

2. For trust companies, the offence under section 49(6) of the TCA in relation to the failure to comply with the confidentiality requirement imposed for protected information under section 49.

MAS has proposed to implement the above changes via amendments to Regulation 36 of the Banking Regulations, Regulation 37 of the new MB Regulations, and Regulation 23 of the Trust Companies Regulations.

Closing Date of Consultation

The consultation closes on 15 January 2021.

A copy of the consultation paper and its accompanying Annexes can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.