DPM's replies to Parliamentary Question: MAS Notice to Banks, Regulation 621
For Parliament Sitting on 20 Apr 98
Question: To ask the Deputy Prime Minister whether the Monetary Authority of Singapore will review the current policy of restricting Singapore-based companies to borrow only in foreign currency to finance their overseas business expansion via shareholder loans and whether the policy can be relaxed to allow Singapore companies to do so in Singapore dollars instead.
Answer: 1 MAS' restriction on Singapore Dollar credit facilities for use outside Singapore applies only to non-residents. Singaporeans, and companies that are majority-owned by Singaporeans, are free to borrow in Singapore Dollars to finance their overseas operations. Banks are not required to consult MAS on such loans, regardless of amount.
2 MAS explained this policy publicly in a letter to the Straits Times in May 1993, after Singapore embarked on the regionalisation drive. It has also informed the banks. But the existing MAS notice to banks, Regulation 621, was issued earlier, in 1992. As it stands, Regulation 621 still states that banks should consult MAS on Singapore Dollar lending to Singaporeans, for use outside Singapore. Banks still feel constrained by what is stated in MAS Regulation 621. MAS will revise the Regulation.
3 MAS is currently reviewing its policy on the internationalisation of the Singapore Dollar. The aim is to make the policy intention clearer and more explicit, and minimise the need for banks to consult MAS before making Singapore Dollar loans to non-residents. The basic policy of not encouraging internationalisation remains unchanged.
4 MAS is working out guidelines to allow subsidiaries of Singaporean companies, and joint ventures between Singaporean and foreign companies, to borrow in Singapore Dollars for purposes of regionalisation projects. We are also examining whether to ease some of the specific restrictions on the use of Singapore Dollars, especially for activities related to the capital markets.
5 MAS will issue a revised Regulation to banks once this review is complete.