New Bill lets MAS regulate FHCs

SINGAPORE - The Monetary Authority of Singapore (MAS) can now strengthen its oversight of financial holding companies (FHCs), after Parliament on Monday approved a Bill that provides a regulatory framework for such entities.

An FHC is a non-operating holding company which is incorporated here and operates a Singapore bank or insurance subsidiary here, or both.

Deputy Prime Minister Tharman Shanmugaratnam, who is the minister in charge of MAS, said: "It is common for internationally active financial groups to be organised under holding companies... The Bill will clarify and ensure appropriate MAS prudential oversight of financial groups in Singapore."

He made the point on Monday at the second reading speech of the Financial Holding Companies Bill, which was passed by Parliament.

Mr Tharman told the House that group-wide supervision allows MAS to assess the impact that a financial institution's relationships with other entities in the group may have on its safety and soundness. He added: "It is aimed at mitigating intra-group contagion risks, preventing the multiple use of capital within the group and limiting concentration risks at the group level."

Countries such as Australia, Canada and the United States have already established legal frameworks for FHCs, he noted.

Not all FHCs here will be regulated by the MAS.

The MAS will follow a set of criteria to assess whether an FHC should be designated for regulation. For instance, MAS will regulate an FHC if it is the ultimate parent of a financial group with a bank or insurance subsidiary here.

Nominated MPs Tan Su Shan and Eugene Tan spoke in support of the Bill. Ms Tan, who is a banker, said it will enhance Singapore's value proposition as a premier international financial centre. Mr Tan said: "It is a timely piece of legislation to support the growth, integrity and robustness of our financial sector."

He asked Mr Tharman for the number of FHCs which are likely to fall within jurisdiction of the proposed law. Mr Tharman said that there are currently five FHCs that meet the criteria to be designated for regulation. According to the MAS, they are DBS Group Holdings, Great Eastern Holdings, ACR Capital Holdings, Citystate Capital Asia and Whittington Group. MAS will formulate the detailed regulations to bring into operation the FHC Bill, he added.

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