28 August 2020
On 3 August 2020, the Monetary Authority of Singapore (“MAS”) announced it will enhance the Significantly Rooted Foreign Bank (“SRFB”) Framework so that in the future, an SRFB that substantially exceeds the criteria for significant rootedness in Singapore may be given additional privileges, including the ability to establish a separate subsidiary to develop alternative business models.
Under the SRFB Framework announced in 2012, Qualifying Full Banks (“QFBs”) that are significantly rooted in Singapore and from jurisdictions that have a Free Trade Agreement (“FTA”) with Singapore are allowed to establish up to 50 places of business (POBs), of which up to 35 may be branches. The assessment of significant rootedness is made by MAS on the basis of a range of quantitative and qualitative attributes, including the bank’s alignment of economic interests with Singapore, local business presence, and commitment to Singapore’s financial stability and development in the long term.
The first FTA that includes SRFB commitments is the EU-Singapore Free Trade Agreement (“EUSFTA”) which entered into force on 21 November 2019.
Enhancement to the SRFB framework
Under the enhanced SRFB framework, MAS will consider granting an additional full bank licence to an SRFB that substantially exceeds the SRFB baseline criteria. This will enable them to have the same flexibility as Singapore-incorporated banking groups to establish subsidiaries, including with joint-venture partners, to operate new or alternative business models such as a digital-only bank.
To determine if an SRFB substantially exceeds the baseline criteria, MAS will consider a range of additional attributes of rootedness in Singapore including:
- Full subsidiarisation of banking business operations in Singapore;
- Significant proportion of global key appointment holders and business heads based in Singapore;
- Firm commitment to Singapore's financial stability and development in the long term, such as:
- being a significant bank in Singapore by headcount, with a focus on developing the talent pipeline in Singapore, through creating jobs or participating in upskilling programmes;
- having a Singaporean/ Singaporean group as a substantial shareholder; and
- demonstrating strong commitment to Singapore’s economy and financial markets, such as if the bank is also an MAS Primary Dealer, leads and participates in key industry initiatives or associations, and is committed to develop new business lines and deepen existing business lines in Singapore.
SRFB privileges, including the award of the additional full bank licence, will continue to be offered only under Singapore’s FTAs that contain SRFB commitments.