30 May 2018

On 26 April 2018, the Monetary Authority of Singapore (“MAS”) issued a consultation paper which sets out its proposal to issue a set of new Guidelines on Individual Accountability and Conduct (“Proposed Guidelines”) to reinforce the responsibilities of financial institutions (“FIs”) in three key areas:

  • promoting the individual accountability of senior managers;
  • strengthening the oversight of employees in materials risk functions (“MRFs”); and
  • embedding standards of proper conduct among all employees.

The Proposed Guidelines are a key part of MAS’ broader efforts to foster a culture of ethical behaviour and responsible risk-taking in the financial industry.

The MAS consultation closed on 25 May 2018.

In brief

MAS proposes to issue a set of new Guidelines on Individual Accountability and Conduct that set out five accountability and conduct outcomes that an FI is expected to work towards:

  • Senior managers who have responsibility for the management and conduct of functions that are core to the FI’s operations are clearly identified.
  • Senior managers are fit and proper for their roles, and held responsible for the actions of their staff and the conduct of the business under their purview.
  • The FI’s governance framework is supportive of and conducive to senior managers’ performance of their roles and responsibilities. The FI’s overall management structure and reporting relationships are clear and transparent.
  • Employees in MRFs are fit and proper for their roles, and subject to effective risk governance as well as the appropriate standards of conduct and incentive structure.
  • The FI has a framework that promotes and sustains the desired conduct among all employees.

Five accountability and conduct outcomes that an FI is expected to work towards pursuant to the Proposed Guidelines

The Proposed Guidelines are intended to supplement the existing legislation, regulations and guidelines, by setting out five accountability and conduct outcomes that FIs are expected to work towards. This outcome-based approach facilitates FIs’ implementation of the Proposed Guidelines in a proportionate manner, as relevant to the nature, size, and complexity of their operations. The Proposed Guidelines are not designed to be prescriptive.

MAS will review the robustness of an FI’s governance arrangements and measures to achieve the objectives and spirit of the Proposed Guidelines through its on-going supervisory process, including inspections, supervisory visits, and meetings with the board of directors (“Board”), senior management, and other employees. MAS will take appropriate supervisory actions where an FI and its Board and senior management do not meet the expectations under the Proposed Guidelines, and/or demonstrate an unwillingness or inability to take remedial actions. This could include issuing warning or reprimand letters, or imposing conditions on the FI’s activities, depending on the nature and severity of the deficiencies observed.

FIs subject to the Proposed Guidelines

MAS proposes to apply the Proposed Guidelines to the following FIs regulated in Singapore:

  • banks, merchant banks or finance companies;
  • Singapore insurers or foreign insurers operating in Singapore under the foreign insurer scheme established under section 35B of the Insurance Act;
  • approved exchanges or approved clearing houses;
  • approved holding companies;
  • holders of a capital markets services licence or financial advisers; and
  • trust companies.

MAS proposes to apply the Proposed Guidelines to locally-incorporated banks and insurers on a group basis.

Implementation timeline

The MAS consultation paper provides that the Proposed Guidelines are targeted to be issued in 4Q 2018. It is proposed that MAS will adopt a consultative approach to assessing FIs’ compliance with the Guidelines in the initial phase of implementation, and continue to engage FIs on the adequacy and effectiveness of their practices through MAS supervision.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg:

 

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