Recent Statutory Amendments Affecting Banks
28 December 2018
Banks will need to include bail-in recognition provisions in certain regulatory capital instruments not governed by Singapore law. New approval and notification requirements also applied to banks as from 30 November 2018. These include a new requirement to inform the MAS of any development that is likely to materially affect adversely the bank, any entity in its bank group or any entity in its financial holding company group.
The new resolution framework for financial institutions was implemented by the Monetary Authority of Singapore (MAS) with effect from 29 October 2018; and
The Banking (Amendment) Act 2016 (Banking Amendment Act) which came into force on 30 November 2018 imposed several new approval and notification requirements on banks (among other things).
The new financial institution resolution framework
Various provisions of the Monetary Authority of Singapore (Amendment) Act 2017 (MAS Amendment Act) came into force on 29 October 2018, together with the Monetary Authority of Singapore (Resolution of Financial Institutions) Regulations 2018 and the Monetary Authority of Singapore (Control of Financial Institutions) Regulations 2018.
Any equity instrument or other instrument that confers or represents a legal or beneficial ownership in the financial institution, except an ordinary share;
Any unsecured liability or other unsecured debt instrument that is subordinated to unsecured creditors’ claims of the financial institution that are not so subordinated; and
Any instrument that provides for a right for the instrument to be written down, cancelled, modified, changed in form or converted into shares or another instrument of ownership, when a specified event occurs.
New matters for which approval will be required under the Banking Amendment Act
A person that opens a representative office for banking business must register with and obtain the approval of the MAS before doing so.
Banks must obtain the approval of the MAS for places where they intend to conduct businesses other than banking business (in addition to the former requirement in relation to banking business).
A bank needs to seek approval for acquiring a major stake in any entity, not just companies (as was previously the case).
A bank incorporated in Singapore must seek the approval of the MAS before appointing any director, the chairman of the board of directors, the chief executive officer, and the deputy chief executive officer. A bank incorporated outside Singapore must seek the approval of the MAS for the appointment of the chief executive officer and the deputy chief executive officer of its bank in Singapore.
New matters for which notification to the MAS is required under the Banking Amendment Act
A bank incorporated in Singapore or a financial holding company must notify the MAS when it becomes aware that a person became its substantial shareholder or controller without first seeking the Minister’s approval, or that a substantial shareholder or controller of the bank or company is not a fit and proper person to be such substantial shareholder or controller.
A bank must inform the MAS of any development that is likely to materially affect adversely the bank. A bank incorporated in Singapore must additionally also inform the MAS of any development that is likely to materially affect adversely any entity in its bank group or its financial holding company group.
New powers for the MAS under the Banking Amendment Act
Impose certain prudential requirements on banks, in order to implement the international banking regulatory framework known as Basel III;
Require a bank (or class of banks) to disclose to the public information relating to its operations and activities and the manner it complies with the banking regulatory regime (among other matters);
Conduct supervisory inspections of local subsidiaries of banks incorporated in Singapore whether the inspection is carried out in Singapore or overseas;
Require a bank to incorporate its banking business in Singapore in order to enhance depositor protection;
Collect information from persons carrying on the business of issuing credit cards and charge cards;
Declare a part of a day as a bank holiday, and to prohibit specific activities, rather than all activities, by a bank during a bank holiday;
Make regulations to require banks to implement risk management systems and controls; and
Direct a bank to take certain actions in relation to transactions which are detrimental to the interests of depositors of banks.
Other miscellaneous matters under the Banking Amendment Act
Provisions as to the duties of auditors of banks have been made more stringent, including enabling the MAS to require a bank to remove an auditor whose performance is not satisfactory and to make it a criminal offence for an auditor to not carry out any duty imposed on it by the MAS. The amendment also grants immunity to an auditor for disclosing information on the bank to the MAS.
Bank directors are currently liable for their banks’ losses arising from the granting of unsecured credit or exposures to the banks’ director groups. These provisions will be repealed and liability will no longer arise.
Licensed credit card or charge card issuers must get the approval of the MAS to open a new place to conduct business.