The Monetary Authority of Singapore (Amendment) Bill 2003
Second Reading Speech by Mr Lee Hsien Loong, Deputy Prime Minister, Minister for Finance and Chairman, Monetary Authority of Singapore
Mr Speaker Sir, I beg to move, "That the Bill be now read a second time".
2 The global financial and regulatory landscape has undergone significant changes in recent years. The management of risk has become more complex. Changing economic conditions and greater market volatility have also increased the risks faced by financial systems. To enable MAS to meet the operational challenges in this new environment and to carry out its functions more effectively, we need to update and fine-tune the MAS Act. We will do so in two phases. This amendment bill is the first phase.
3 Mr Speaker Sir, I will now touch on key amendments proposed in this bill.
Stability and Public Confidence
4 To safeguard the stability of the financial system and maintain a high level of public confidence, it is prudent to give MAS more operational flexibility to deal with contingencies. Clause 3 of the Bill seeks to update section 6 of the MAS Act to enable MAS to set aside provisions for contingencies such as market volatilities.
5 Since inception, MAS has been permitted to set aside provisions for contingencies such as those which banks usually set aside. However, recent changes in accounting standards have restricted the conditions under which provisions can be set aside. Now, provisions are only allowed where there is some certainty to the outflow and a reliable estimate can be made. This is too restrictive for MAS' purposes. The proposed revision in Clause 3 seeks to allow MAS to set aside provisions to deal with contingencies beyond what the accounting standards now allow.
6 In addition, Clause 3 seeks to give MAS the ability to draw on its retained earnings in the General Reserve Fund when making payments to the Government in any given financial year. Clauses 8 and 9 propose changes to sections 23 and 26 to allow MAS greater flexibility in lending to financial entities for the purpose of safeguarding the financial system.
(i) Accounting Standards 7 Other central banks and monetary authorities, like the US Federal Reserve Board and the Bank of England, recognise that accounting standards developed for commercial entities have not been formulated for entities with the unique powers and responsibilities of central banks. The example on providing for contingencies beyond what is presently allowed under the accounting standards is a case in point. In line with the practice in other central banks, Clause 11 amends section 34 of the Act to allow MAS to comply with accounting standards to the extent that it is appropriate to do so, having regard to its objectives and functions.
(ii) Immunity Provision 8 In recent years, international supervisory standards have called for legal protection for both supervisory agencies and their staff. MAS and its officers should be protected from legal suits against them arising from their supervisory actions carried out in good faith. Clause 7 re-enacts section 22 of the Act, which will confer immunity from suits or other legal proceedings to MAS and persons acting on behalf or under the direction of MAS. Clauses 12 and 13 repeal the immunity provisions contained in the various Acts administered by MAS, as these provisions are no longer necessary with the enactment of the new section 22.
(iii) Committees and Delegation of Authority 9 To discharge their functions more effectively, major central banks and financial regulators have provisions to allow the Board or Chief Executive to form committees and to delegate authority to such committees. Although it can be inferred from the MAS Act that MAS presently has similar powers, an explicit provision to that effect would provide greater legal clarity and align MAS' legislation with international best practices. Clauses 4 and 6 amend section 9 and insert a new section 13A to clarify that the Authority and the Managing Director may form committees and delegate powers to them or designated officers. Notwithstanding the delegation of any power, function or duty, they remain responsible for and retain control over how the delegated functions are exercised.
10 These amendments to the MAS Act comprise the more immediate changes to be effected by early 2004. Consequential amendments will also be made to other written laws administered by MAS.
11 MAS is presently reviewing other operational issues for the second phase amendments to the MAS Act, which are targeted to come into force in 2005. All these changes are intended to enable MAS to carry out its functions more effectively and to meet the operational challenges ahead.