Second Reading Speech by Mr Lim Hng Kiang, Minister for Trade & Industry and Deputy Chairman, Monetary Authority of Singapore
The Monetary Authority of Singapore (Amendment) Bill 2007
Mr Speaker Sir, on behalf of the Senior Minister, I beg to move that the Bill be now read a second time.
2 There have been significant changes in the global financial and regulatory landscape since the MAS Act was enacted 36 years ago. To keep pace with these changes, MAS embarked on a review of the MAS Act and proposed a series of amendments. The amendments will enable MAS to carry out its functions more effectively to meet the challenges of a dynamic global financial and regulatory landscape.
3 The amendments are aimed at improving three broad areas: firstly accountability and governance, second, streamlining of operations and thirdly, providing MAS with the flexibility to address emerging issues. Mr Speaker Sir, I will now touch on the key amendments proposed in this Bill.
(A) IMPROVING ACCOUNTABILITY AND GOVERNANCE
Specifying MAS' Objects and Functions
4 MAS' mission is to promote sustained non-inflationary economic growth and a sound and progressive financial centre. To this end, MAS performs the multiple functions of a central bank, an integrated financial supervisor and a developer of the financial sector. We propose to explicitly set out these functions in the Bill.
5 The Bill will also set out the objects of these functions. They are: maintaining price stability conducive to sustainable economic growth; fostering a sound and reputable financial centre; ensuring the prudent and efficient management of Singapore's official foreign reserves; and growing Singapore as an internationally competitive financial centre.
Clarifying the Board's Accountability to the Minister-in-Charge of MAS
6 Next, the MAS Board will be required to keep the Government informed of matters of policy through the Minister-in-charge of the MAS. In addition, the Board will also be required to furnish the Minister with information regarding MAS upon request .
Report on MAS' Performance in Annual Report
7 MAS' annual reports presently give an overview of MAS' performance and initiatives by highlighting key achievements and work in progress. To enhance MAS' accountability, the proposed amendment in the Bill proposes for the annual report to include a write-up on MAS' performance in its functions and duties.
MAS' position on lending to the Government and public authorities
8 Monetary discipline has underpinned Singapore's solid economic fundamentals. While there is tacit understanding that MAS as the central bank will not lend to the Government for the purpose of deficit financing, making this principle explicit in the MAS Act will help to provide a clear separation of responsibilities between monetary and fiscal policies. This is essential for good governance. It will put in place safeguards that prevent MAS from financing Government deficits, thereby sending a strong signal of Singapore's commitment to monetary discipline and price stability. The amendment will also set out the limited exceptions under which the prohibition may be lifted.
(B) STREAMLINING OPERATIONS
Discharge of Managing Director (MD)'s Duties
9 Currently, only MAS Board directors may be appointed as acting MD of MAS by the Minister to cover the duties of the incumbent MD. Over the years, MAS has groomed an effective senior management team which works closely with the Board and the MD. We therefore propose to allow MAS senior management, comprising assistant and deputy managing directors, in addition to MAS Board of directors, to be appointed as acting MD by the Minister. Such appointments will require the President's concurrence. This amendment will enhance MAS' operational efficiency and flexibility as MAS senior management already assist the MD in day-to-day running of the MAS.
Approval for investment in new securities and investments
10 The other amendment is to streamline the decision-making process for the investment of MAS' funds. Presently, the MAS Board makes the broad investment policy and other key investment decisions for the MAS. However, MAS is still currently required to seek the President's approval for new securities and investments that it may purchase or sell using MAS' funds. The range of new securities and assets is getting wider and more complex; it is very cumbersome for the President to have to approve every recommendation of new security and investment. Over the years, MAS has put in place a governance framework with a set of independent checks with regard to the investment of MAS' funds. The MAS Board is also well positioned to approve these new securities and investments. We therefore propose that the MAS Board be empowered to do so. MAS will continue to provide regular reports to keep the President's Office updated on its overall financial performance. These amendments have been endorsed by the President.
(C) REVISING THE SCOPE OF MAS' POWERS
Powers to enable MAS to issue regulations on anti-money laundering & countering financing of terrorism ("AML/CFT") matters
11 Singapore is fully committed in our efforts to keep our financial system clean and well-regulated. Indeed, our success as a financial centre has been built on a consistent track record of integrity and the rigorous implementation and enforcement of international standards. To better meet our international obligations and keep pace with evolving international standards on anti-money laundering and countering financing of terrorism (AML/CFT), we propose to include a new section 27B in the MAS Act. The new section will consolidate requirements currently imposed under various Acts and enable MAS to issue regulations or directions to counter money-laundering and terrorism financing, thereby achieving a more responsive regulatory framework.
Powers to approve a dispute resolution scheme
12 A key aspect of consumer empowerment is to provide consumers with recourse to an affordable, accessible and independent dispute resolution mechanism. It is therefore important for MAS to have the authority to approve schemes for the resolution of disputes arising from the provision of financial services in Singapore. The proposed new powers will also enable MAS to require a financial institution to be a member of an approved dispute resolution scheme and to comply with the prescribed terms of that membership.
General power of composition
13 Lastly, in view of the increased provisions in the MAS Act that may attract criminal penalties upon contravention, we propose to introduce a general composition provision to enable MAS to prescribe and compound penalties on offences that it considers appropriate.
14 Mr Speaker Sir, the environment that MAS operates today is increasing in complexity, requiring greater flexibility from MAS. The proposed amendments to the MAS Act will enable MAS to carry out its functions more effectively and to meet the operational and policy challenges ahead.
15 Mr Speaker Sir, I beg to move.
1 Separately, section 7(2) will be revised as follows "The board shall, from time to time, inform the Government of the regulatory, supervisory and monetary policies of the Authority" to reflect MAS' expanded roles over the years (e.g. insurance supervision and financial sector development).