Extension of Grace Period for BanksDivestment of Non-Financial Businesses
Singapore, 22 Aug 2003...The Monetary Authority of Singapore (MAS) today announced that it will extend by two years the grace period for Singapore banks to divest their non-financial businesses. Banks may apply to MAS for the extension, which will allow them until 17 July 2006 to complete the required divestitures.
In July 2001, the Banking Act was amended to give legislative effect to MAS' policy requiring the separation of banks' financial and non-financial businesses. Since then, all the banks have made progress towards the divestment of their non-financial businesses. However, economic and market conditions over the past two years have been more difficult than anticipated. MAS has therefore decided that it will extend the grace period, if the banks so require.
As part of the broader review of the capital adequacy framework for the local banks, MAS is also reassessing the capital treatment of banks' significant investments in both financial and non-financial companies. Against other adjustments that MAS may implement, higher capital is likely to be required for banks' investments in such companies, to be commensurate with the risks associated with them. MAS will consider international best practices in its review and expects the revised framework to be in place by 1Q 2004.