Since 1998, MAS has been liberalising our policy on the non-internationalisation of the S$ in order to facilitate the development of Singapore's capital markets. While doing so, we took into account the potential impact on our conduct of monetary policy. Nevertheless, as our markets deepened and became more mature, and coupled with our experience in managing larger S$ flows, we were able to consider bolder and more aggressive steps to liberalise the policy further.
2 MAS recently completed a review of the policy, following extensive discussions with key market players in Singapore since September last year. I am pleased to inform you that with effect from 20 March 2002, MAS will implement a revised MAS Notice 1201. The revised Notice will contain only two broad guidelines limiting the use of the S$. All other restrictions will be lifted.
3 The two remaining guidelines will state that:
(a) Where non-resident entities wish to use S$ proceeds obtained from S$ loans, equity listings or bond issuances to finance their activities outside Singapore, dealers must ensure that the S$ proceeds are swapped or converted into foreign currency upon draw-down by such entities.
(b) For S$ credit facilities exceeding $5 million, dealers shall not extend such facilities to non-resident financial entities if there is reason to believe that the S$ proceeds may be used for S$ currency speculation.
4 With the revised Notice, dealers will be able to conduct a greater range of activities in the FX, equity and debt capital markets with non-resident financial entities. In particular, I wish to highlight changes in three areas:
Exemption
The following entities will be exempted from the S$ lending restrictions of the Notice:
(a) all individuals
(b) all non-financial entities
Activities
For non-resident financial entities, the following financial activities will be liberalised:
(a) Asset swaps, cross-currency swaps and cross-currency repos can be transacted freely. These instruments will no longer be considered as forms of S$ lending.
(b) Securities Borrowing and Lending (SBL): Dealers may lend any amount of S$-denominated securities to non-resident financial entities, in exchange for both S$ or foreign currency-denominated collateral.
(c) S$ FX options: Dealers may transact S$ FX options freely with non-resident financial entities, i.e. without the need for documentary evidence showing that such transactions are for hedging purposes.
(d) Investments in financial assets and real estate: Dealers are no longer required to ensure that S$ credit facilities extended for investment purposes be withdrawn when the investments, or part thereof, are liquidated.
Reporting Requirements
Dealers will no longer need to submit reports on their:
(a) net open nominal S$ options position
(b) aggregate nominal amount of S$ interest rate derivative products
Dealers will also not need to formally inform MAS of the launch of any S$ debt issues which they may be arranging.
5 A copy of the revised MAS Notice 1201 is enclosed in Annex 1. It is also available for download at the MAS website. For ease of reference, Annex 2 outlines the key amendments to restrictions under the previous Notice. In Annex 3, we enclose a list of frequently asked questions (FAQs) about the Notice. If you have any enquiries, please direct them to the Monetary Management Division, MAS at telephone number 62299150 or facsimile number 62299491.
Yours faithfully
ONG CHONG TEE
EXECUTIVE DIRECTOR
MARKETS AND INVESTMENTS
Annex 2
(PDF, 14.9KB)
