THE FINANCIAL SECTOR:
KEY SUPERVISORY AND REGULATORY INITIATIVES
     
Content Page
Supervision
Regulation
Risk-based Regulatory Regime
Fine-Tuning Regulatory framework
Ensuring Sound Market Conduct
Innovative Systems for Efficient Payment
and Settlement
 
 
RISK-BASED REGULATORY REGIME
 
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Liquidity Requirement . Box 4 – Being Prepared For Emergencies
 
Risk-based Capital for Insurers and Banks
 
MAS worked on a risk-based capital (RBC) framework for insurance companies in close consultation with insurance practitioners and the actuarial and accounting professions. The RBC framework, which is near completion, focuses on the determination of risksensitive capital requirements for insurance companies and the valuation of assets and liabilities using a realistic basis.

Last year, we also amended the Insurance Act (IA) on provisions necessary to implement the RBC framework. Proposed regulations, notices and guidelines on the new valuation basis and capital requirements were released for public consultation in November 2003. In addition, further testing of the framework was conducted in early 2004.

The final Insurance (Valuation and Capital) Regulations, Insurance (Accounts and Statements) Regulations, Insurance (Actuaries) Regulations, Notice on the Valuation of Policy Liabilities of Life Business, and Guidelines on the Valuation of Policy Liabilities of General Business are targeted for issue in the latter part of 2004.

In May 2004, MAS issued details of changes to the capital adequacy requirements for Singapore-incorporated banks under the Current Accord. From 30 June 2004, MAS will lower Tier One capital adequacy ratio (CAR) requirement from 8% to 7%, and the total CAR requirement from 12% to 10%. In addition, MAS will also adjust the rules for computing CAR.

The Basel Committee on Banking Supervision finalised the New Basel Capital Framework (New Framework) in end June 2004. MAS intends to adopt the New Framework in tandem with the G10 countries. We will continue to work closely with the Singapore-incorporated banks to assess the impact of the New Framework and determine how best to adapt the proposals for Singapore.
 
During the year, MAS consolidated, streamlined and fine-tuned our regulations to ensure that Singapore’s financial system remains dynamic and relevant in a fast-paced environment. We worked closely with industry, listened to them and sought solutions to their needs. We issued 19 consultation papers in the last financial year. The feedback provided MAS the industry perspective on the proposed changes.