SINGAPORE - Banks will no longer be required to segregate their domestic and offshore operations for accounting purposes, Deputy Prime Minister Tharman Shanmugaratnam told a gathering of bankers.
Mr Tharman was speaking at the 42nd annual dinner of the Association of Banks in Singapore, held on Tuesday at Raffles City Convention Centre.
Banks have been required to register their domestic banking units (DBU) and Asian Currency Units (ACU) as separate accounting entities. The DBU of a bank holds its domestically focused operations denominated in Singapore dollars, while the ACU holds its offshore operations entirely denominated in foreign currency.
The divide was intended to safeguard Singapore's domestic market without unduly impinging on regional activities of banks here.
It was implemented when Singapore introduced the Asian Dollar Market, a market in which US dollars and other foreign currencies are transacted.
The divide required banks to set up the ACU to book their Asian Dollar Market operations and other foreign currency transactions. Banks book their domestically focused operations, primarily denominated in Singdollars, in the DBU.
The divide has served Singapore well for decades but has been losing its relevance, said DPM Tharman.
The divide between domestic and offshore banking has in practice become increasingly porous, he noted.
There have also been major regulatory developments in the last five years which have resulted in banks' offshore activities being subject to rules which are broadly similar to those governing domestic banking in Singapore.
These global reforms have put all banks on a sounder footing, Mr Tharman said.
The Monetary Authority of Singapore will consult the industry extensively on implementation issues, he added.