MAS move to bar e-wallet operators from lending will benefit local banks: Moody's

The legal requirements that the Monetary Authority of Singapore is seeking to impose are "credit positive" for deposit-taking banks in Singapore, Moody's said in a report. ST PHOTO: KUA CHEE SIONG

SINGAPORE - Local banks will benefit from the impending move by the Monetary Authority of Singapore (MAS) to bar larger electronic wallet operators from lending their wallet funds, according to Moody's, a credit ratings agency.

According to a Moody's report on Monday (Oct 15), the legal requirements that MAS is seeking to impose are "credit positive" for deposit-taking banks in Singapore, including OCBC Bank, United Overseas Bank and DBS Bank.

"The regulatory barrier will protect incumbent banks' lending margins and support revenue streams amid growing competition from fintech players," analysts said in the report.

The regulation and oversight of electronic wallet operators will also keep their business growth and associated risks in check, benefiting the stability of the financial sector, the report added.

Earlier this month (Oct 10), The Business Times (BT) reported that larger electronic wallet operators in Singapore will be required to ring-fence their wallet funds under the new Payment Services Bill, slated to come into force next year.

The move is expected to apply to electronic wallet operators with an average daily electronic money float of more than $5 million. They will have to fully secure and safeguard the funds.

Mr Ravi Menon, MAS managing director, told BT that the move is to prevent payment start-ups from straying into shadow banking.

The Moody's report added that the restrictions will help Singapore avoid the aggressive lending practices that new fintech players could potentially adopt since they face lighter regulation, compared with banks.

"The restrictions will also maintain the high regulatory standards expected of deposit-taking and lending institutions such as commercial banks and finance companies, including capital and liquidity requirements and risk management practices," Moody's analysts said.

It will also allow fintech companies to "compete rigorously to remain viable in Singapore's rapidly growing but fragmented electronic payments space," they added.

Mr Menon had told BT: "We want to achieve a level playing field from the perspective of risk."

He noted, however, that MAS will not compromise on cybersecurity and anti-money laundering standards but will calibrate the rules according to the scale of the fintechs' operations.

President of Singapore FinTech Association Chia Hock Lai said that the ring-fencing move is "consistent with MAS's stated regulatory stance of materiality and proportionality when dealing with financial innovation".

Mr Chia said: "The impact will be minimal as it only affects the large payment fintechs which are far fewer in numbers.

He added: "(The proposed laws are) a good balance against the kind of systemic risk that shadow banking would entail."

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