MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS, in June 2015, had announced that it will remove the divide between the Domestic Banking Unit (DBU) and the Asian Currency Unit (ACU). Banks and merchant banks will no longer need to maintain two separate accounting units with effect from October 01, 2020. MAS subsequently conducted a closed consultation with merchant banks in February 2019, on the proposed consequential amendments to merchant banks’ regulatory requirements, following the removal of the DBU-ACU divide. MAS is considering the feedback received and will incorporate it into the relevant provisions, where appropriate. 

In this consultation, MAS has proposed to consolidate the regulation of merchant banks under the Banking Act, upon removal of the DBU-ACU divide. The existing bank directives and notices, which have been issued under section 28 of the MAS Act, will accordingly be replaced by the proposed Banking Act provisions as well as regulations and notices issued under the Banking Act. The consolidation of merchant bank regulation under the Banking Act is not intended to introduce new requirements or modify existing ones, except for changes that have been previously communicated or under consultation with the merchant banks.

MAS also proposed to move merchant banks to a licensing regime from the current approval framework under MAS Act. A licensing regime is appropriate as, like banks, merchant banks are subject to a formal set of prudential requirements. Under the proposed licensing regime, regulatory requirements for merchant banks will continue to be calibrated to reflect the different business models and activities of merchant banks compared to banks.

Comment Due Date: June 19, 2019

Keywords: Asia Pacific, Singapore, Banking, Banking Act, Licensing, MAS Act, MAS