19 March 2002, Singapore ... The Monetary Authority of Singapore (MAS) today announced further measures to liberalise its S$ non-internationalisation policy.  The Authority said that the latest measures represent another significant step in facilitating participation by international investors and financial institutions in Singapore's capital markets.

Speaking at the opening of the Euromoney Asia-Pacific Issuers and Investors Forum in Singapore today, Deputy Prime Minister & MAS Chairman Lee Hsien Loong announced that with effect from 20 March 2002, MAS would lift restrictions in a few key areas. 

First, it will exempt all individuals and non-financial entities, which include corporate treasury centres, from the S$ lending restrictions of the non-internationalisation policy.  This recognises that such entities are not usually the prime drivers of destabilising currency speculation. 

Second, for non-resident financial entities that continue to be governed by the S$ policy, the MAS lift restrictions in the following financial activities:

  i. Asset swaps, cross-currency swaps and cross-currency repos can be transacted freely.  MAS had hitherto treated such transactions as forms of S$ lending.  This will no longer be the case.

  ii.  Securities Borrowing and Lending (SBL): Financial institutions in Singapore may now lend any amount of S$-denominated securities in exchange for both S$ or foreign currency-denominated collateral.  MAS will lift the requirement that any lending of S$ securities exceeding $5 million has to be fully collaterised by S$ collateral.

  iii. S$ FX options: Financial institutions may also freely transact S$ FX options with non-resident entities.  They no longer need to maintain documentary proof showing that S$ FX option transactions with non-resident entities are for hedging purposes.

  iv. Investments in financial assets and real estate: Financial institutions are no longer required to ensure that S$ credit facilities extended for investment purposes be withdrawn when the investments are either wholly or partially liquidated.  This will relieve financial institutions of the need to institute arrangements to keep track of their non-resident investor's investments in financial assets.

DPM Lee said that with the latest liberalisation measures, what used to be a policy comprising detailed and complex guidelines has now been substantially stripped down to two basic requirements:

First, where non-resident entities wish to obtain an S$ loan, or tap Singapore's equity or bond markets to fund overseas activities, they would need to swap or convert the S$ proceeds into foreign currency as and when the proceeds are used offshore.  DPM Lee said that this guideline was unlikely to stand in the way of market development, as such non-resident entities would swap or convert the S$ proceeds into a currency of their choice for overseas use. 

Second, MAS will continue to prohibit financial institutions to extend S$ credit facilities exceeding S$5 million to non-resident financial entities where there is reason to believe that the proceeds may be used for speculation against the S$ exchange rate. This continues to be necessary, as there is no strong reason for the MAS to allow offshore speculators to access relatively greater liquidity inherent in Singapore's onshore FX swaps and money market.

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.  MAS had also allowed interest rate derivative products to be transacted freely.  Last year, MAS announced that banks could lend S$ to non-residents for investment purposes in Singapore, and freely transact S$ currency options amongst financial institutions based in Singapore.

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