(Delivered in Parliament on 29 February 2016)
Madam Speaker, it is important for the MAS to be sufficiently empowered to take a pro-active stance in regulating the banking sector. The global financial crisis showed the world how high the stakes are in getting our banking regulatory frameworks right.
Prudential safeguards such as, for example, empowering the MAS to require a bank to incorporate locally; only allowing “fit and proper” people to own significant stakes in banks or be a controller of the bank; and providing safe harbour protection for external auditors who whistle-blow; will enhance the ability of the MAS to protect banking customers as well as the stability and safety of the banking system.
Having said this, we must ensure the continued competitiveness of our banking sector. Singapore’s financial services sector makes a very significant contribution to jobs and GDP in Singapore. Regulations should be framed and implemented in such a way as to minimise ambiguity. This would ensure that banks do not “overegg the pudding” so as to drive up compliance costs that could end up being passed onto the end-customers of banking products, not to mention crimp the job-creation engine of the sector.
In this context, I would like to pose a few clarifying questions and make some suggestions with respect to implementing specific provisions of the Bill.
The bill imposes new requirements and expanded penalties for engaging in related party transactions that are detrimental to the interests of depositors, including non-exposure transactions. If the MAS uses this power to direct a bank to terminate a transaction with its related party, it could conceivably result in a financial loss much bigger than the $250,000 fine. Such a decision could also inflict reputational damage on the bank.
In relation to this provision – Clause 17 – there is a risk that if banks do not clearly understand the guidelines which the MAS will use to exercise its power to terminate transactions or eliminate exposures, this may create a culture of excessive notification and consultation with the MAS at best, or excessive risk-aversity at worst.
The Bill also requires banks to immediately notify MAS of any developments that would adversely and materially affect its financial soundness, reputation and ability to conduct business.
In relation to this provision –Clause 34 – there is a risk that if the banks do not clearly understand what needs to be and what does not need to be reported to the MAS, this will create a burden of excessive notification which may raise compliance costs, however slightly. And these compliance costs may end up being passed onto end-consumers.
In respect of these two provisions – Clause 17 and Clause 34 – I would like to ask if the MAS will provide banks with guidelines that it will use to determine what constitutes a transaction or exposure that could be potentially terminated by the MAS and what constitutes a notifiable material development. Will the MAS, for instance, be publishing a guidance document on how it will operationalize these powers,similar to the guidance published on anti-money laundering and terrorism finance in 2015 and private banking controls in 2014.
Moving onto the next part of my speech, there are certain provisions in the bill which I do not oppose.
Nevertheless these provisions would give the MAS additional powers over banks and in some cases these powers may lengthen the turnaround time for decisions, limit business flexibility and therefore raise the cost of doing business however slightly.
Therefore, in the interest of transparency, I would like to pose some questions to better understand the government’s thinking in relation to these issues and what facts prompted the government to include these provisions in the bill. This information may be relevant to actors in other national sectors than just the banking sector.
Clause 46 (inserting a new Section 57EA) requires banks, credit and charge card issuers to obtain approval from the MAS for places where they intend to conduct certain businesses.
I would like to ask what facts or trends have prompted the government to impose a requirement that banks seek the approval of MAS for these decisions as opposed to just notifying the MAS.
It would be helpful for the public to better understand what facts the MAS is detecting about such practices by banking businesses as it may have implications for other sectors of society.
Is the MAS detecting overly aggressive marketing practices for credit or charge cards that may be fuelling over-spending by at-risk families? If so, it would be useful to highlight this. NGOs and VWOs working with at-risk families could help to provide feedback to the MAS if they notice such unhealthy card marketing practices on the ground. This could help the MAS to decide which locations are appropriate locations to allow credit or charge card-related activities.
The Bill also requires banks to seek MAS approval as well for changing locations or adding locations for non-banking activities, including money-changing and remittance services.[1] Unlike wealth management products under the FAA (Financial Advisers Act) with risk of capital loss, money-changing and remittance are considered non-banking activities. Once again, I would like to ask what facts or trends have prompted the government to impose a requirement that banks seek the approval of MAS for locations choice for non-banking activities like remittance and money-changing, as opposed to just notifying the MAS.
Madam Speaker, I support the bill.
[1] http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/Speeches/2016/Explanatory-Brief-Banking-Amendment-Bill-2016.aspx Banks are currently required to seek MAS’ approval for places of business at which banking business, namely, deposit taking, paying and collecting cheques drawn by or paid in by customers or lending, is conducted. There is currently no requirement for them to seek MAS’ approval for conducting non-banking activities such as money changing.