27 June 2019
The Monetary Authority of Singapore (“MAS”) is seeking feedback on proposals set out in its consultation paper on regulating and licensing of merchant banks (“MBs”) under the Banking Act (“BA”). The consultation closed on 19 June 2019.
MAS is proposing to consolidate the regulation of MBs under the BA upon removal of the divide between the Domestic Banking Unit (“DBU”) and the Asian Currency Unit (“ACU”). MAS had conducted a public consultation on proposed amendments to the key regulatory provisions that refer to the DBU-ACU divide in August/September 2015. This followed MAS’ announcement in June 2015 that it would remove the divide. Banks and MBs will no longer need to maintain two separate accounting units with effect from 1 October 2020.
MAS had sought feedback from MBs in a closed consultation in February 2019 on the proposed consequential amendments to MBs’ regulatory requirements following the removal of the DBU-ACU divide. Where appropriate, MAS will incorporate the feedback into the BA.
The MAS is also proposing to move MBs to a licensing regime from the current approval framework under the Monetary Authority of Singapore Act (“MAS Act”). The draft amendments to the BA to effect these proposals are set out in the consultation paper.
Regulating merchant banks under the BA
MBs are currently approved under section 28 of the MAS Act and governed by the Directives and Notices issued under the MAS Act. In addition, MBs’ ACU operations are subject to requirements under the BA pursuant to section 77 of the BA. Section 77 will be repealed following the removal of the DBU-ACU divide. As the bulk of MBs’ operations are in the ACU and currently regulated under the BA, MAS will consolidate the regulation of MBs under a new Part VIIB of the BA upon removal of the DBU-ACU divide. Existing Directives and Notices to MBs issued under section 28 of the MAS Act will be replaced by the proposed BA provisions, as well as Regulations and Notices issued under the BA.
Licensing merchant banks under the BA
MAS also proposes to move MBs from the current approval framework under the MAS Act to a licensing regime under the BA. MAS is proposing this change as MBs are, like banks, subject to a formal set of prudential requirements. The draft amendments to the BA include provisions providing for the licensing and minimum capital requirements of MBs and control of shareholding and voting power in MBs. Under the proposed licensing regime, MAS will continue to calibrate the regulatory requirements for MBs to reflect the different business models and activities of MBs compared to banks.
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