Singapore’s legislature enacted the Financial Holding Company Act 2013 (“Act”) on 8 April 2013. The Act introduces a regulatory framework for the Monetary Authority of Singapore (“MAS”) to regulate financial holding companies (“FHCs”) and the subsidiaries of an FHC (“FHC Group”).
An FHC is a non-operating holding company that has at least one subsidiary which is a bank or insurance company incorporated in Singapore, and the financial subsidiary/subsidiaries contribute 50% or more of the assets, capital, liabilities or revenue of the FHC Group.
The Act only covers designated FHCs, and sets out a list of criteria which MAS will consider in assessing whether an FHC should be designated for regulation. MAS will look to regulate an FHC where the FHC is the ultimate parent, but also where the FHC is an intermediate holding company (depending on factors including the significance of the entity in the wider FHC Group, the potential affect on the stability of the Singapore financial system, and the extent of supervision of the ultimate FHC in its home jurisdiction). Non-designated FHCs will not be directly regulated under the Act, but may be required to furnish MAS with information that is necessary to carry out MAS’ surveillance and supervision function.
The Act applies a new regulatory regime to designated FHCs including requiring prior approval of the substantial and controlling shareholdings of an FHC, who must each be a fit and proper person (i.e. mirroring the controls under the recently revised Insurance Act). Other regulatory powers of MAS are also strengthened, such as the inspection and investigation of the FHC Group and requirements on group-wide capital adequacy to ensure that the FHC Group maintains financial resources commensurate with the entire group’s business, placing prudent limits on lending and investment to ensure that exposure is not unduly concentrated, and requirements for regular reporting on the finances and other information on the FHC Group. The FHC legislation is expected to be implemented in late 2013-early 2014 and the MAS has commented that it will allow an appropriate transition period for FHCs to comply.