MAS proposes amendments to Banking Act to remove DBU-ACU divide and other changes

26 February 2019

The Monetary Authority of Singapore (“MAS”) has issued a consultation paper on “Proposed Amendments to the Banking Act” and is seeking feedback on the draft changes to the Banking Act which seek to remove the divide between the Domestic Banking Unit (“DBU”) and the Asian Currency Unit (“ACU”) for banks in Singapore. MAS is also proposing other Banking Act amendments in other areas to strengthen the licensing and regulation of banks and credit card or charge card licensees, formalise existing supervisory requirements and clarify other technical and administrative issues. The consultation closes on 8 March 2019.

Remove DBU-ACU divide for banks in Singapore

The removal of the DBU-ACU divide and related legislative changes will take effect on 1 October 2020. By way of background, MAS had conducted a public consultation in August/September 2015 on proposed amendments to thekey regulatory provisions that refer to the DBU-ACU divide. This followed MAS’ announcement in June 2015 that it would be removing the divide. On 10 February 2017, MAS released its Response to feedback from the public consultation and confirmed that the concept of DBU-ACU would be removed in the legislative framework for both banks and merchant banks.

More grounds for revocation of bank licences

Section 20 of the Banking Act sets out the various grounds on which MAS may revoke a bank’s licence. To enhance MAS’ enforcement powers over banks and provide clarity on circumstances under which MAS may revoke a bank licence, MAS proposes to expand the grounds set out in section 20 to include:

  • contraventions of provisions of the Monetary Authority of Singapore Act, which contains requirements such as those relating to anti-money laundering; 
  • for a foreign-owned bank incorporated in Singapore, when the parent bank’s licence is withdrawn, in line with MAS’ powers over foreign bank branches in Singapore; and 
  • when it appears to MAS that it is in the public interest to do so, which is a ground available for cancellation, revocation, or withdrawal of licences, approvals, or recognition for most other financial institutions. 

Empower MAS to approve 20% controllers and key appointment holders, and remove key appointment holders, of credit card or charge card licensees

Currently, the licence conditions of credit card or charge card licensees require notification to MAS of changes to their controllers, directors and prescribed executive officers. To enhance MAS’ ability to ensure the fitness and propriety of controllers and key appointment holders of such licensees, MAS proposes to amend the Banking Act to subject the following to MAS approval:

  • For locally incorporated credit card or charge card licensees: (i) 20% controllers, and (ii) appointments of directors, chairman of the board of directors, Chief Executive Officer (“CEO”), deputy CEO and other prescribed person.
  • For foreign incorporated credit card or charge card licensees: Appointment of the Singapore CEO, deputy CEO and any other prescribed person.

Changes to the Banking Act are also proposed to empower MAS to remove a director, chairman of the board of directors, CEO, deputy CEO and any other prescribed person of a credit card or charge card licensee where the person no longer fulfils the fit and proper criteria.

Revise requirement for auditors to report to MAS material adverse developments affecting banks’ financial soundness

Auditors are currently required to report to MAS when the auditor is satisfied that a bank has incurred losses that reduce its capital funds by 50%. As the removal of the DBU-ACU divide will result in the definition of capital funds for bank branches being deleted, MAS proposes to require auditors to report material adverse developments relating to banks’ financial soundness. These include developments that affect banks’ statement of financial position and their continued operations or viability, such as material losses, and material uncertainty related to asset valuations, asset recoverability, or funding adequacy.

For banks incorporated in Singapore, in addition to the requirement for auditors to report material adverse developments relating to financial soundness, MAS will retain the requirement for auditors to report losses where those losses reduce such banks’ capital funds by 50% or more.

Banks to publish notification statement in local newspapers if they opt to publish audited accounts on their Internet websites

Section 25(2) of the Banking Act requires banks to publish their latest audited annual balance-sheet, profit and loss account and other information (“Accounts”) in newspapers. MAS proposes to allow banks to publish their Accounts on their Internet websites as an alternative. MAS will continue to prescribe in the Banking (Publication of Accounts) Regulations the manner in which banks may publish their Accounts.

MAS will require a full bank that chooses to publish its Accounts on its Internet website to publish a notification statement in at least four local daily newspapers (one each published in the Malay, Chinese, Tamil and English language) and in at least one local English language daily newspaper for any other bank. This will allow members of the public relying on newspapers as a primary source of information to be notified of the publication of the bank’s Accounts. The notification statement must state that the published information is available on the bank’s Internet website and provide a link to the website. It must also be stated that the published information is available to any person upon request.

Reference materials

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

 

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