On 8 April 2014, the Financial Holding Companies Act 2013 (the "Act") was gazetted. However, the Act has not come into force yet.
The Act introduces a regulatory framework for the Monetary Authority of Singapore (the "MAS") to regulate financial holding companies ("FHCs") and their financial groups. Under the Act, an FHC is defined as a Singapore-incorporated holding company:
That has at least one subsidiary that is a bank incorporated in Singapore or licensed insurer incorporated, formed or established in Singapore, and
Which subsidiary that is a financial institution accounts, or which subsidiaries that are financial institutions in the aggregate account, for 50% or more of the assets, capital, liabilities or revenue of the FHC group of the holding company.
The Act will provide greater clarity to the industry and other stakeholders on the rules and standards applicable to financial groups organised under FHCs in Singapore. The Act extends group-wide supervision by the MAS to an FHC and its financial group. 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.
Under the new regulatory framework, the MAS may designate an FHC that satisfies the prescribed criteria as a "designated financial holding company". The designated financial holding company is then subject to various controls and requirements, including controls over shareholding, limits on exposures and investments, minimum asset and capital requirements, audit and inspections, control by the MAS in insolvency, duty to assist foreign regulatory authorities, and control over appointment of directors and chief executives.