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Singapore Banks Asked to Separate Financial, Non-Financial Activities
The Monetary Authority of Singapore (MAS) will enforce new regulations requiring the separation of financial and non-financial activities of Singapore banks and asked local banks to implement these changes within three years, Singapore Deputy Prime Minister Lee Hsien Loong told bankers Wednesday evening.
Speaking at the annual dinner of the Associations of Banks in Singapore, Lee, who doubles as MAS chairman, said the measures are a necessary part of Singapore's on-going reform initiative to strengthen the domestic banking sector.
He said the new regulations will require significant corporate restructuring and divestment of non-financial assets from banks, a new structure for grouping the financial activities under the bank or under a non-operating financial holding company, and separation between management of the financial entities and that of their non- financial affiliates.
The new regulations also ban the financial entities from directly or indirectly owning the shares of non-financial firms
affiliated to the same principal shareholders and sharing names and logos with non-financial entities, he added.
Lee stressed that the separation of non-financial activities from the banking groups and the unwinding of cross-shareholdings are aimed at limiting the risks of contagion to the banks, enhancing market discipline, increasing transparency and ensuring that bank management focuses its attention on the core business of banking.
Ultimately, the banks improved performances will benefit depositors and shareholders and strengthen the financial system as a whole, he added.
The deputy prime minister also warned against a fire sale of non-financial assets from banks, saying fire sale would weaken the banks and diminish confidence, and would be against the interests of shareholders and depositors.
In order to avoid uncertainty and minimize the tax impact on the banks arising from the divestment of assets as required by the new rule, the government has decided on a set of one-off administrative concessions which will facilitate the exercise, he announced.
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