Banking Act amended to formalise supervisory requirements and strengthen regulation of banks and credit card and charge card licensees: Allen & Gledhill

13 October 2020

On 1 October 2020, amendments to the Banking Act (“BA”) aimed mainly at formalising existing supervisory requirements and strengthening the regulation of banks and credit card and charge card licensees entered into force. Key amendments effected by the Banking (Amendment) Act 2020 include:

formalising the powers of the Monetary Authority of Singapore (“MAS”) to impose stable funding requirements through the insertion of a new provision in the BA;
revisions to the disclosure requirements in relation to a bank’s leverage ratio;
revisions to the requirement for banks to publish audited accounts; and
powers for MAS to approve or remove certain key appointment holders of credit card and charge card licensees.

Various related amendments to MAS Notices also took effect on 1 October 2020.

Net stable funding requirements

MAS imposes the net stable funding requirements via MAS Notice 652 on “Net Stable Funding Ratio” (“Notice 652”). The new section 10C of the BA formalises MAS’ power to impose such funding requirements on banks to ensure that a bank has a stable and sustainable funding structure for its activities. Consequently, MAS can require the manner of compliance with these requirements to be publicly disclosed (under section 10B of the BA), and MAS will have the power to secure the banks’ compliance with this new provision (under section 65 of the BA). Consequential amendments effective 1 October 2020 have been made to Notice 652.

Revisions to disclosure requirements in relation to bank’s leverage ratio

Section 10A(2) of the BA has been amended to set out a wider range of matters that may be prescribed by a notice in relation to the minimum leverage ratio requirement set out in section 10A(1). Among other things, a bank in Singapore may be required to report to MAS its leverage ratio and the manner in which and the process by which it calculates its leverage ratio. In addition, amendments have been made such that the notice issued by MAS may apply to a single bank incorporated in Singapore (in addition to a class of banks incorporated in Singapore).

Revisions to requirement for banks to publish audited accounts

Under the new section 25(1A) of the BA, MAS is empowered to require a bank or class of banks to make available to any person, upon the person’s request, a copy of its latest audited annual balance‑sheet and profit and loss account together with any notes on that balance‑sheet and account, a copy of the report of the auditors, a document containing the names of directors of the bank and subsidiary companies of the bank, as well as additional information that the bank is required to publish under section 25(4) of the BA.

Under the amended section 25(4), MAS may require a bank to publish any additional information, including additional information that does not relate to the accounts of the bank for the financial year.

Section 25(2) of the BA has also been amended such that MAS may prescribe any manner for the publication of a copy of a bank’s latest audited annual balance-sheet and profit and loss account, including publication otherwise than in a newspaper. These matters are provided for under the Banking (Publication and Provision of Accounts) Regulations and MAS Notice 607 on “Publication of Financial Statements”, which were also amended to take effect on 1 October 2020.

New requirements for credit card and charge card licensees

The new section 57FA of the BA provides that a person licensed to carry on the business of issuing credit cards or charge cards in Singapore must seek MAS’ approval before appointing key appointment holders such as directors, the chairman of the board and the chief executive officer. In considering whether to grant an approval, MAS may consider if the person is fit and proper to hold the appointment, having regard to its Guidelines on Fit and Proper Criteria.

Under the new section 57FB of the BA, a director or an executive officer of a licensee in Singapore may be removed from his or her office or employment in certain circumstances.

The new sections 57FC, 57FD and 57FE introduce a new 20% limit on shareholding or control of voting power in a licensee. MAS’ approval will be required before a person becomes a 20% controller of a licensee.

Amendments to MAS Notices

In addition to the amendments mentioned above, the following MAS Notices were amended on 1 October 2020:

MAS Notice 637 on “Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore” has been amended to (a) define regulatory loss allowance which is recognised as Tier 2 Capital, (b) revise the capital treatment for public sector entities, and (c) implement other technical revisions to the credit and market risk framework.
MAS Notice 639 on “Exposures to Single Counterparty Groups” has been amended such that the Notice now applies to only banks incorporated in Singapore.

The following MAS Notices, originally scheduled to take effect on 1 October 2020, will now take effect on 1 July 2021 instead:

MAS Notice 643 on “Transactions with Related Parties”.
MAS Notice 643A on “Exposures and Credit Facilities to Related Concerns”. The consequential cancellation of MAS Notice 639A on “Exposures and Credit Facilities to Related Concerns” will now also take effect on 1 July 2021 instead.
MAS Notice 656 on “Exposures to Single Counterparty Groups for Banks Incorporated in Singapore”.

Background

The Banking (Amendment) Act 2020 was gazetted on 13 February 2020. Apart from the provisions which entered into force on 1 October 2020, the Banking (Amendment) Act 2020 also provides for the removal of the divide between the Domestic Banking Unit and the Asian Currency Unit, as well as the consolidation of the licensing and regulation of merchant banks under the BA. These changes have not entered into force.

Reference materials

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

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