MAS revised Notice 1005A that sets out the credit grading treatment for credit facilities granted support in response to the ongoing COVID-19 outbreak, between January 01, 2021 and December 31, 2021. Notice 1005A clarifies that, for the stipulated period, a merchant bank is not required to classify the credit facility of a borrower, just because the borrower is being granted extended credit support measures. Instead, merchant banks should holistically assess a borrower’s ability to fully repay its credit facilities. The revised Notice 1005A applies to merchant banks in Singapore and takes effect from June 30, 2021. MAS has also revised Notice 631 with respect to the mean of "customer" under Banking Act, guidelines on margin requirements, and guidelines on fit and proper criteria.
The following are the key highlights of the announced revisions:
- Notice 631 on meaning of customer under Banking Act. This notice specifies that, under section 40A of the Banking Act, the term "customer" excludes any company carrying on merchant banking business or investment banking business. The notice applies to all banks in Singapore and takes effect on July 01, 2021.
- Guidelines on margin requirements for non-centrally cleared over-the-counter (OTC) derivatives contracts. The guidelines cover the scope of products and entities, margin calculations and methodologies, and eligible collateral and haircuts. These revised guidelines, which have been issued pursuant to section 321 of the Securities and Futures Act (Cap. 289), apply to the MAS Covered Entities and take effect on July 01, 2021.
- Guidelines on fit and proper criteria. The guidelines set out the fit and proper criteria that apply to all relevant persons carrying out any MAS-regulated activity. The relevant person is expected to be competent, honest, have integrity, and be of sound financial standing. The guidelines cover definitions of relevant persons, scope of application, and criteria for considering whether a relevant person is fit and proper. The revised guidelines became effective immediately on publication.
Additionally, MAS has updated the list of frequently asked questions (FAQs) on the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013. The FAQs, which are relevant for over-the-counter counterparties, are intended to aid in the implementation of the reporting obligations and elaborate on MAS’ intent for certain requirements set out under the Securities and Futures (Reporting of Derivatives Contracts) Regulations. MAS also announced the cancellation of several Notices and Directives, which had been issued under the MAS Act and held relevance for merchant banks, with effect from July 01, 2021. The cancelled instruments cover topics such as corporate governance, capital adequacy, credit risk, and the MAS approach to resolution.
Effective Date: June 30, 2021 (Notice 1005A)/July 01, 2021
Keywords: Asia Pacific, Singapore, Banking, Margin Requirements, COVID-19, Credit Risk, Merchant Banks, Loan Repayment, Banking Act, OTC Derivatives, FAQ, Securities and Futures Regulation, Loan Moratorium, Capital Adequacy, Governance, Operational Risk, MAS
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