New MAS Measures To Separate Financial And Non-financial Activities Of Banking Groups
Singapore, 21 June 2000...The Monetary Authority of Singapore has announced new regulations requiring the separation of financial and non-financial activities of Singapore banks. Speaking at the annual dinner of the Association of Banks Singapore, MAS Chairman DPM Lee Hsien Loong said that the measures are a necessary part of Singapore's ongoing reform initiative to strengthen the domestic banking sector.
DPM Lee said that the separation of non-financial activities from the banking groups and the unwinding of cross-shareholdings are aimed at limiting the risks of contagion to the banks, enhancing market discipline, increasing transparency and ensuring that bank management focuses its attention on the core business of banking. Ultimately, the banks improved performance will benefit depositors and shareholders, and strengthen the financial system as a whole.
The commingling of financial and non-financial activities has not resulted in serious problems so far, because the principal shareholders have run the banks prudently and properly. However, problems will manifest themselves only in times of stress, as the experiences of other countries have shown. DPM Lee said we are acting now when the banks are sound and must not delay or put off changes which are essential for minimising potential vulnerabilities and crucial to the banks' long-term strength.
The new regulations will require significant corporate re-structuring and divestment of non-financial assets from the banks. DPM Lee said there is no reason to force a fire sale, which would weaken the banks and diminish confidence, and would be against the interests of shareholders and depositors. MAS will give the local banks three years to implement the changes.
To minimise the tax impact on the banks arising from the divestment of assets as required by the new rules, the Government has decided on a set of one-off administrative concessions which will facilitate the exercise.
"The separation of financial and non-financial activities will be another major step forward in strengthening the local banks," said DPM Lee. He also urged all banks to continue to upgrade their capabilities and build up their management teams, in order to prepare themselves for the new opportunities and challenges arising from the rapid changes of technology and the market.
The Changes and What They Mean
|What are the changes?
|What do they mean?