MAS published Notices 1108 and 1001 for merchant banks, revised guidelines on the risk management practices of Board of Directors and senior management of financial institutions, and updated guidelines on the application of banking regulations to Islamic banking. Both the guidelines will take effect on July 01, 2021. The guidelines on risk management practices set out corporate governance roles of the Board of Directors and senior management of a financial institution in ensuring a sound risk management culture and environment. These guidelines cover roles and responsibilities of the Board and senior management pertaining to risk management, risk culture and risk appetite, risk management systems and framework, and reporting to MAS.
The guidelines on corporate governance practices highlight that the Board should ensure that senior management maintains a sound system of risk management and internal controls to safeguard stakeholders’ interests and the institution’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives. The Board and senior management should understand the institution’s business strategy, nature of the business activities, new products, material modifications to existing products, and major management initiatives and their associated risks. Senior management should provide the Board with information on all potentially material risks facing the institution, including those relevant to the institution’s risk profile, capital and liquidity needs. The guidelines further mention that the Board and senior management should notify MAS in advance of any substantive changes in the institution’s business activities, structure and overall condition, or as soon as they become aware of any material adverse developments, including breach of legal or prudential requirements. MAS should also be notified of material information that may negatively affect the suitability of a relevant shareholder, and the fitness and propriety of a Board member or a member of the senior management.
The guidelines on application of banking regulations to Islamic banking cover general approach of MAS to the regulation of Islamic banking, providing guidance on the admission framework for financial institutions intending to offer Islamic financial services and the regulatory treatment for Islamic banking products, including the capital treatment of such products. These guidelines only cover the application of the Banking Act (Cap 19), Banking Regulations and written directions issued pursuant to the Banking Act, and do not cover the application of other legislation, such as the Securities and Futures Act and Financial Advisers Act. These guidelines apply to all financial institutions offering Islamic banking in Singapore.
In addition, MAS published Notices 1108 and 1001 for merchant banks, which will take effect from July 01, 2021. MAS Notice 1108 sets out requirements for merchant banks on protecting the confidentiality of customer information in all outsourcing arrangements. This notice applies to all merchant banks. It sets out the conditions for outsourcing operational functions when such functions involve disclosure of customer information, and which will be performed outside Singapore. MAS Notice 1001 sets out definitions for the terms "capital funds" and "net head office funds" for merchant banks. MAS also announced that it will be cancelling guidelines for operation of merchant banks with effect from July 01, 2021.
Effective Date: July 01, 2021 (Guidelines)
Keywords: Asia Pacific, Singapore, Banking, Merchant Banks, Islamic Banking, Governance, Regulatory Capital, Banking Act, ESG, MAS
Previous ArticleIOSCO Publishes Report on Sustainability-Related Issuer Disclosures
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.
The European Banking Authority (EBA) Single Rulebook Question and Answer (Q&A) tool updates for this month include answers to 10 questions.
The European Commission, or EC, finalized the Implementing Regulation 2021/2017 with respect to the benchmark portfolios, reporting templates, and reporting instructions for the supervisory benchmarking of internal approaches for calculating own funds requirements.
The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.
The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).
The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.