28 June 2018

The Payment and Settlement Systems (Finality and Netting) Act (“FNA”) provides for the protection of payment and settlement systems from disruptions that may generate systemic risks in the financial system.

Broadly, with effect from 6 June 2018, the FNA has been amended as follows:

  • Enhanced insolvency protection: The protection of payment transactions under the FNA has been enhanced by extending the period during which transactions enjoy finality and hence, protect a wider range of transactions from insolvency law in a liquidation event. Previously, the FNA did not protect a designated system if it continued to process, net or settle transactions beyond the calendar day on which a participant became insolvent. To mitigate this risk, the FNA has been amended by extending insolvency protection of transfer orders, netting and settlement by one business day beyond the day on which a participant becomes insolvent. This will cater to systems which operate in multiple time zones or where an insolvency of a participant occurs close to the end of a day and spans into the next day.
  • Clarity in designation criteria: The FNA now sets out clear criteria for the Monetary Authority of Singapore (“MAS”) to designate payment and settlement systems. Designation will focus on critical systems as a disruption in the operations of such a system may transmit further disruption to its participants, or to the wider financial system or affect public confidence in other payment systems.
  • Strengthen MAS’ administrative powers: MAS’ powers to obtain information and issue directions to rectify outstanding issues are enhanced. The participant, operator, settlement institution and collateral holder of a designated system are required to notify MAS of potential insolvency. A designated system is also required to seek MAS approval before rules which govern the essential roles, responsibilities and operations of a designated system can be implemented or amended.

Reference materials

The following materials are available on the Singapore Statutes Online website sso.agc.gov.sg:

 

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