Parliament: New Bill to expand grounds to revoke bank licences and rationalise bank accounting units

SINGAPORE - The grounds on which bank licences can be revoked by the Monetary Authority of Singapore (MAS) will be expanded, among proposed changes introduced in Parliament on Monday (Nov 4).

The Banking (Amendment) Bill was put before the House by Second Minister for Finance Lawrence Wong, on behalf of Senior Minister and Minister-in-charge of the Monetary Authority of Singapore (MAS) Tharman Shanmugaratnam.

Currently, MAS has no express power to revoke a bank's licence for breaches of the MAS Act, or if the parent bank of a Singapore-incorporated foreign bank has had its licence withdrawn.

To enhance MAS' enforcement powers and provide clarity on the circumstances under which MAS may revoke a bank licence, the grounds will be expanded to include: contravention of provisions of the MAS Act; for a foreign-owned bank incorporated in Singapore when the parent bank's licence is withdrawn; and when MAS assesses that it is in the public interest to do so.

Banks' separate accounting units will also be rationalised under the changes.

Since 1968, all banks have to maintain two accounting units: the Domestic Banking Unit (DBU) and the Asian Currency Unit (ACU).

But this divide has lost its relevance as banks' offshore activities are now subject to similar requirements as their domestic businesses, said the MAS in an explanatory note on Monday.

It also imposes a compliance burden on banks without enhancing prudential soundness or systemic stability.

The licensing and prudential regulation of merchant banks will also be consolidated under the Banking Act.

Now, such banks are subject to an approval regime under the MAS Act but conduct most of their operations through the ACU, which is regulated by the Banking Act.

Bringing their regulation entirely under the Banking Act will streamline the regulatory framework, said the MAS.

For example, the Bill will set out the licensing regime for merchant banks and clarify their permitted scope of activities, including restrictions on acceptance of Singapore dollar (SGD) deposits and borrowing in SGD.

The Bill will also provide MAS with new powers to regulate banks' outsourcing arrangements.

In their agreements, banks and merchant banks will be required to include terms on MAS' right to audit the service providers, protect customer information and to terminate the agreement under certain circumstances.

Explaining the move, the MAS said: "These powers are important for stronger supervisory oversight, in light of the increased prevalence and complexity of banks' outsourcing arrangements, and the criticality of protecting customer information."

Two other Bills were introduced in Parliament on Monday - the Healthcare Services Bill and the Statutes (Miscellaneous Amendments) Bill.