MAS Liberalises Its Singapore Dollar (S$) Non-Internationalisation Policy
6 December 2000 - The Monetary Authority of Singapore (MAS) announced today further measures to liberalise its policy on the non-internationalisation of the S$. The central bank said that the latest measures, spelt out in the revised MAS Notice 757, were significant steps facilitating participation by international investors and financial institutions in Singapore's capital markets.
Two key changes announced today were:
Banks can now lend S$ to non-residents for investment purposes in Singapore. They can also extend S$ credit facilities to non-residents to fund offshore activities, as long as the S$ proceeds are swapped into foreign currency.
As a result, non-residents can now obtain S$ funding for investment in S$ equities, bonds and real estate 1. This will help to broaden the investor base for S$ assets.
Banks can now transact in S$ currency options with other banks and financial institutions in Singapore that are regulated under MAS Notice 757 or its equivalent. Allowing interbank options will facilitate the use of currency options for hedging, and offer a new growth opportunity for the treasury industry.
Concurrently, the MAS has issued an equivalent Notice, MAS Notice 1201, for securities intermediaries in Singapore. Foreign securities intermediaries in Singapore will henceforth be deemed as "residents", and can freely obtain S$ funding to finance their capital market activities. Previously, foreign securities intermediaries had been considered non-residents, and therefore had limited access to S$ funding.
MAS said that the new measures will pave the way for more international investors and securities intermediaries to contribute significantly to the growth of Singapore's financial markets. Said Mr Koh Yong Guan, MAS Managing Director: "With greater participation by international financial players, we can expect the S$ capital markets to grow in size, liquidity and sophistication."
"In the past, MAS had sought to limit participation in the S$ markets by foreign investors, in order to minimise volatility in the S$ exchange rate. As S$ capital markets have deepened and developed over the last few years, this is no longer a policy objective. With the latest revisions to MAS Notice 757, the primary objectives of the S$ policy are to limit borrowing of S$ by non-residents for currency speculation, and to discourage the development of an offshore S$ market."
"These latest changes, together with the liberalisation measures that MAS has implemented in the past 3 years, have eliminated virtually all regulatory hurdles to the growth of the S$ capital markets. What remains now are a few critical safeguards to ensure that the effective conduct of our monetary policy is not compromised," said Mr Koh.
MAS first began liberalising its non-internationalisation policy in late 1998. Since then, it has allowed foreign entities to list S$ denominated shares and issue S$ bonds, and swap the proceeds out of Singapore. MAS had also allowed over-the-counter (OTC) interest rate derivative products to be transacted freely, and lifted the S$20 million consultation limit for repurchase transactions in Singapore Government Securities (SGS) and S$ bonds with non-residents.