MAS issues guidelines on individual accountability and conduct to strengthen culture of responsibility and ethical behaviour in financial industry: Allen & Gledhill

14 September 2020

On 10 September 2020, the Monetary Authority of Singapore (“MAS”) issued the Guidelines on Individual Accountability and Conduct (“Guidelines”). The Guidelines, which take effect on 10 September 2021, are aimed at strengthening the accountability of senior managers in key functions in financial institutions (“FIs”) and promoting ethical behaviour in FIs. The Guidelines were accompanied by an Information Paper on Culture and Conduct Practices of Financial Institutions (“Information Paper”) on good practices in these areas.

The Guidelines set out the five accountability and conduct outcomes (“Outcomes”) that FIs should achieve:

Outcome 1: Senior managers responsible for managing and conducting the FI’s core functions are clearly identified.
Outcome 2: Senior managers are fit and proper for their roles, and held responsible for the actions of their employees and the conduct of the business under their purview.
Outcome 3: The FI’s governance framework supports senior managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.
Outcome 4: Material risk personnel are fit and proper for their roles, and subject to effective risk governance, and appropriate incentive structures and standards of conduct.
Outcome 5: The FI has a framework that promotes and sustains among all employees the desired conduct.

Specific guidance and a set of frequently asked questions (FAQs) have also been provided to help FIs achieve the five Outcomes.

In addition, FIs should promote a culture of ethical behaviour by strengthening practices in other areas set out in the Information Paper. These additional areas include hiring, communication channels, monitoring and assessment, and performance management. The Information Paper contains examples of good practices gathered from a thematic survey and dialogue sessions conducted by MAS with banks, insurers and capital markets intermediaries.

MAS states that FIs should use the Guidelines and the guidance in the Information Paper to develop and entrench a strong culture of responsibility and ethical behaviour within their organisations. MAS will continue to engage FIs, their boards, senior management and other employees on the adequacy and effectiveness of their culture and conduct practices through its ongoing supervision.

Response to feedback on consultation on proposed scope of application of the Guidelines

By way of background, on 26 April 2018, MAS issued a consultation paper on its proposal to introduce the Guidelines. On 6 June 2019, MAS issued its response to feedback received from the consultation paper, and issued a further consultation paper to seek feedback on (i) the proposed additional scope of FIs to apply the Guidelines on, and (ii) the proposed headcount threshold of 20, to distinguish smaller FIs which MAS will not ordinarily expect to adopt the specific guidance under the five Outcomes.

On 10 September 2020, MAS issued its response to the 6 June 2019 consultation paper (“Response”). Feedback from the consultation was taken into consideration and incorporated into the Guidelines where appropriate.

The key points MAS addressed in its Response include the following:

Registered fund management companies and firms which provide payment services under the Payment Services Act will be included in the scope of the Guidelines as the five Outcomes are standards of good governance that MAS expects of FIs.
Entities exempt from licensing under the Payment Services Act will not be included in the scope of the Guidelines. This is in line with MAS’ regulatory approach to exempt such parties from licensing.
Variable capital companies (“VCCs”) will not be included in the scope of the Guidelines as the day-to-day management of VCCs will be carried out by an MAS-regulated fund manager who will already be included in the scope of the Guidelines.
An FI will not ordinarily be expected to adopt the specific guidance described under the five Outcomes if it has a headcount of fewer than 50. This is an increase from the 20 headcount threshold previously proposed by MAS. FIs however are expected to achieve the five Outcomes regardless of whether they fall above or below the threshold.

Reference materials

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