An extract from The Banking Regulation Review, 11th Edition


Singapore has a reputation as a key regional and global hub for companies to do business. It has consistently been ranked one of the easiest places in the world to do business, and the most competitive country in Asia, enjoying a stable business environment.

In June 2019, an assessment under the Financial System Stability Assessment of the International Monetary Fund (IMF) found Singapore's attractiveness as a financial centre to be underpinned by strong economic fundamentals, sound economic policies and a sophisticated financial oversight framework. The assessment by the IMF affirms Singapore's standing as a sound and stable financial centre.

The three local banks in Singapore – DBS Bank Limited, Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited – are on the list of the world's 50 safest banks in 2019 as compiled by Global Finance.

The Monetary Authority of Singapore (MAS) is banker and financial agent to the government and the central bank of Singapore. Following its merger with the Board of Commissioners of Currency on 1 October 2002, MAS has also assumed the functions of currency issuance. MAS's functions include:

  1. to act as the central bank of Singapore, including the conduct of monetary policy, the issuance of currency and the oversight of payment systems, and serving as banker to and financial agent of the government;
  2. to conduct integrated supervision of financial services and financial stability surveillance;
  3. to manage the official foreign reserves of Singapore; and
  4. to develop Singapore as an international financial centre.

MAS's approach is to utilise risk-based supervision, rather than to use prescriptive one-size-fits-all rules. MAS adopts a consultative approach in regulating the financial sector, actively seeking feedback from market practitioners and the public with a view to developing regulations that take into account market realities and industry practices.

The regulatory regime applicable to banks

Singapore-licensed banks come within the ambit of the Banking Act and the Monetary Authority of Singapore Act (the MAS Act), and are supervised and regulated by MAS. Banks have to comply with the provisions in the Banking Act and the MAS Act and the subsidiary legislation issued thereunder, as well as with notices, circulars, guidelines, practice notes and codes issued periodically by MAS.

There are two types of bank licences under the Banking Act: a full bank licence and a wholesale bank licence.

Full banks may provide the whole range of banking business permitted under the Banking Act, which includes deposit taking, the provision of cheque services and lending. While a full bank may engage in the full range of both Singapore dollar and non-Singapore dollar-denominated banking business, foreign banks with full bank licences are restricted in the number of branches and automated teller machines (ATMs) that they may operate. However, a foreign bank with a full bank licence that has been conferred with qualifying full bank privileges may operate at more locations, share ATMs among themselves and relocate their sub-branches freely.

Wholesale banks may engage in the same range of banking business as full banks, except they do not carry out Singapore dollar retail banking activities. They operate within the Guidelines for Operation of Wholesale Banks issued by MAS. They may additionally operate Asian currency units (ACUs). The ACU is an accounting unit that the banks use to book all their foreign currency transactions conducted in the Asian dollar market. MAS's approval is required for the operation of an ACU. Banks' Singapore dollar transactions are separately booked in their domestic banking units.

Aside from the banking activities outlined above, banks may also carry on any other business that is regulated or authorised by MAS (including capital market services, financial advisory services and insurance broking), or otherwise prescribed or approved by MAS. Banks are, however, prohibited from engaging in non-financial activities.

In addition to the two categories of licensed banks, financial institutions may be approved by MAS to operate as merchant banks under the MAS Act. The operations of merchant banks are governed under MAS's directives to merchant banks. The scope of activities a merchant bank may undertake is generally narrower than that for licensed banks, but a merchant bank may also apply to MAS for approval to operate an ACU and thereby compete with licensed banks in the non-Singapore dollar banking market.