Singapore, 28 June 2012…The Monetary Authority of Singapore (MAS) announced changes to its Qualifying Full Bank (QFB) programme to encourage foreign banks to deepen their roots in Singapore in a way that strengthens Singapore’s financial stability.

2   MAS will require existing QFBs that are important to the domestic market to locally incorporate their retail operations. In determining whether a QFB will be required to locally incorporate its retail operations, we will review factors such as the QFB’s market share of domestic deposits. MAS will consult QFBs on the criteria for requiring local incorporation.

3   For QFBs that operate as local subsidiaries, a very small number may become significantly rooted in Singapore over time. MAS will consider granting such QFBs an additional 25 places of business, of which up to 10 may be branches. This will be part of an overall package negotiated with these QFBs’ home countries which are free trade agreement (FTA) partners with Singapore. These QFBs will be able to operate up to 50 places of business in Singapore.

4   To determine if a QFB is significantly rooted, MAS will consider a range of quantitative and qualitative attributes, including whether –

• the majority of the Board of its local subsidiary are Singaporeans and Permanent Residents and what types of businesses are conducted by the local subsidiary;
• Singapore is one of the QFB’s major markets contributing a substantial part of profits and assets to the bank group;
• major business lines and key decision makers are headquartered in Singapore; and
• the bank serves a comprehensive spectrum of the local community in Singapore.

The QFB will have to demonstrate its long-term commitment to Singapore’s financial stability and development.

5   In addition, MAS will continue to consider awarding new QFBs only under FTA negotiations. New QFBs that are granted under future FTA offers will have to first locally incorporate before they may establish up to 25 places of business.

6   The changes announced today relate to QFBs only. QFBs have greater branching privileges than other foreign banks, and hence, greater access to the retail market. For QFBs with a significant share of domestic retail deposits, local incorporation is an additional safeguard for domestic retail depositors. Local incorporation can also bring benefits to a bank. It can demonstrate a bank’s commitment to depositors and other stakeholders and help the bank secure more long-term, stable sources of funding at a time of growing financial volatility and uncertainty.

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Notes to Editor:

1   Qualifying Full Banks (QFBs) have greater branching privileges than other foreign banks. QFBs may conduct the full range of banking businesses permitted under the Banking Act, including retail deposit-taking.

2   There are eight QFBs at present, namely, Australia & New Zealand Banking Group Limited, BNP Paribas, Citibank Singapore Limited, Hongkong and Shanghai Banking Corporation Limited, ICICI Bank Limited, Malayan Banking Berhad, Standard Chartered Bank, and State Bank of India.

3   Citibank Singapore Limited is a locally incorporated retail subsidiary while Standard Chartered Bank announced in February 2012 that it will also locally incorporate its retail operations. All QFB applicants are subject to strict licensing criteria that include the banks’ track record, financial soundness, strength of home country supervision, banking strategy, and risk management systems. Aside from the QFBs awarded under the banking liberalisation programme, QFBs are now awarded solely under free trade agreements (FTAs).

4   The category of QFBs was first created in 1999 under the first phase of banking liberalisation measures to distinguish the QFBs from the existing Full Banks. One of the key privileges of QFB status was the increased number of places of business that a QFB can have, compared to the other foreign banks. The number of QFBs has increased from four in 1999 to six in 2001 and eight today. The QFB privileges have also expanded gradually over the years, as summarised in Table 1.

5   The announced changes relate to QFBs only. There are no changes to branching privileges for other types of bank licences and majority of these banks operate as branches.

Table 1: QFB Privileges over the Years (1999-2005)