More powers for MAS to tackle failing institutions

Regulatory changes have been tabled to strengthen the powers of the Monetary Authority of Singapore (MAS) to resolve the position of distressed financial institutions in an orderly manner.

Resolution essentially involves the restructuring of a failing financial institution to ensure financial system stability.

Proposed changes to the law introduced in Parliament yesterday will consolidate MAS' powers to require pertinent financial institutions - such as banks, finance companies and collective investment scheme trustees - to prepare and maintain their recovery plans and submit information for resolution planning.

The new amendments will also temporarily stay the rights of a financial institution's counterparty to terminate contracts when the MAS has exercised its resolution powers.

"This would provide the MAS with sufficient time to implement resolution measures, such as a transfer of business functions to a bridge entity," the central bank said.

Another part of the amendments will introduce a framework for MAS to recognise all or part of any resolution action taken by foreign authorities on financial institutions in Singapore.

Meanwhile, a framework will be implemented to establish resolution funding arrangements, which will be used to meet the costs of implementing resolution measures, MAS added.

These included "the provision of loans to a financial institution under resolution, initial capital for a bridge entity, administrative costs and creditor compensation claims".

The Bill yesterday followed a round of public consultation in 2015 discussing enhancements to MAS' resolution regime. The changes were then proposed in April last year.

A version of this article appeared in the print edition of The Straits Times on May 09, 2017, with the headline 'More powers for MAS to tackle failing institutions'. Print Edition | Subscribe