MAS: Annual report 2006 / 2007
	CONTENTS HOME   ENTERPRISE: Our Role BUILDING ON A ROBUST MACROECONOMIC ENVIRONMENT DEVELOPMENTS IN THE SINGAPORE SECURITIES MARKET FOSTERING A SOUND & REPUTABLE FINANCIAL CENTRE RISK MANAGEMENT & INFRASTRUCTURE GROWING SINGAPORE AS AN INTERNATIONALLY COMPETITIVE FINANCIAL CENTRE CURRENCY ORGANISATIONAL INITIATIVES		FOSTERING A SOUND & REPUTABLE FINANCIAL CENTRE 25 Changes to Capital Requirements for Singapore-incorporated Banks 25 Enhancing MAS’ Role in Bank Resolution 25 Changes to Rules on Unsecured Credit 25 Shift Towards Large Exposures Regime 26 Introduction of Asset Maintenance for Foreign Banks 26 Box 3 - An Update On Basel II Implementation In Singapore 26 Legislative Amendments to Securities and Futures Act and Financial Advisers Act 27 Box 4 - Monograph On Supervisory Framework For Financial Institutions 27 T rust Companies 28 Self-assessment Initiative 28 Anti-Money Laundering & Countering the Financing of Terrorism 28 Building Confidence in E-payments and Internet Banking Systems 28 Insurance Securitisation 29 Nomination of Beneficiaries to Insurance Policies 29 Policy Owners’ Protection Fund 29 Box 5 - Supervision Of New Initiatives in the     Singapore Capital Markets - Jade And AsiaClear 30 Mortgage Insurance 30 Thematic Approach to Market Conduct Supervision 30 Box 6 - Market Manipulation 31 Mystery Shopping on Practices in the Financial Advisory Industry 31 Review on Switching of Investment Products 31 Enhancing Market Discipline 31 Corporate Governance of Listed Companies 32 Amendment to Code on Collective Investment Schemes 32 Implementation of Payment Systems (Oversight) Act 2006 32   Mortgage Insurance Mortgage insurance protects mortgage lenders against losses on mortgage loans arising from default by borrowers. In July 2005, MAS announced an increase from 80% to 90% in the “loan-to-value” (LTV) limit for housing loans granted by banks. Together with this increase, we also announced that we are prepared to consider mortgage insurance as an alternative risk mitigant to higher capital charge on loans with LTVs exceeding 80% and that we would study the appropriate regulatory framework for mortgage insurers. In October 2006, we conducted a public consultation on the regulatory framework for the mortgage insurance business and treatment of mortgage insurance in the calculation of the capital requirements for Singapore-incorporated banks. The framework was finalised and implemented in the first quarter of 2007. Under the new regime, mortgage insurers must operate as mono-line insurers and establish contingency reserves for peak losses during downturns in the economic and property cycles. In addition, all mortgage lenders must make adequate disclosure to borrowers where mortgage insurance arrangements create any obligation on the borrowers or confer mortgage insurers any right against borrowers. For the purpose of calculating regulatory capital requirements, Singapore-incorporated banks may now recognise the credit risk mitigation effects of qualifying mortgage insurance on housing loans with an LTV exceeding 80%.