Extra option for fund to generate income to grow financial sector

Singapore's financial sector development fund (FSDF) will soon get an extra option to generate more income to grow the dynamic financial sector further.

This comes after the Exchanges (Demutualisation and Merger) (Amendment) Bill was passed yesterday, allowing a special purpose company holding Singapore Exchange (SGX) shares for the benefit of the fund to expand its SGX share holdings by subscribing to SGX rights issues or to receive SGX scrip dividends.

Minister of State for Trade and Industry Alvin Tan, speaking on the Bill yesterday, said the updates to the law do not change the basic objective of the legislation or special purpose company SEL Holdings' purpose of supporting the FSDF.

"It only enables SEL to participate in corporate actions taken by SGX, under which SEL may elect to receive new SGX shares," he said.

SEL is designated to hold SGX shares specifically for the benefit of FSDF. The amendments passed mean the FSDF will get an additional option to generate income.

"This is important because the FSDF... is to drive growth and create good jobs for Singaporeans in a very dynamic and fast-evolving financial sector in the coming years," said Mr Tan, who is a board member of the Monetary Authority of Singapore (MAS).

The FSDF was set up in 1999 to support the development of Singapore as a financial centre, and is controlled and administered by MAS. The dividends and any proceeds in respect of the original SGX shares are channelled towards the FSDF to fund sector development initiatives like pushing innovation.

During the debate on the Bill, Workers' Party MP He Ting Ru (Sengkang GRC) and Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) had asked about how SGX could keep up with competition and stay relevant amid technological disruptions, with the FSDF partly funded by SGX's dividends and shares.

Responding, Mr Tan said FSDF's fund size has tripled since its inception, and MAS will continue to be disciplined in managing its grants and invest its surpluses in a diversified investment portfolio, so as to sustain the fund's ability to support financial sector development initiatives over the long term.

Before the Covid-19 pandemic, the FSDF's annual expenditures were "within $90 million", he said. In the 2020/2021 fiscal year, its annual expenditure rose to $247 million as new support schemes were launched to sustain and strengthen capabilities in the financial services and fintech sectors amid the Covid-19 disruptions, he added.