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%.