Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC at the Second Reading of the Banking (Amendment) Bill 2019 (Bill No. 35/2019)
Sir, I stand in support of the Bill.
The amendments, which update the Banking Act have been through two rounds of consultations. The MAS has also published a detailed response to feedback received on the proposed amendments.
I commend the transparency and rigour of MAS’ consultation process. I am heartened that increasingly we see not just public consultations on Bills but also detailed responses to the feedback received.
Sir, I would like to seek some clarifications on the Bill and also offer some suggestions.
Grounds for revocation of bank licences
The amended Section 20(1) will expand the grounds for revocation of bank licenses, allowing MAS to revoke a bank license if it “is satisfied that it is in the public interest to do so” under Section 20(1)(d).
In response to questions on when MAS would consider it to be in the public interest to revoke a bank licence, MAS responded that it will consider the factors set out in MAS’ Enforcement Monograph.
This includes whether there was ineffective governance, widespread control failures, pervasive non-compliance, gross misconduct, or serious breaches of applicable law.
The Enforcement Monograph is a guidance document that is not strictly legally binding. Revoking a bank license is a very drastic step and yet the considerations stated in the Enforcement Monograph are not strictly legally binding. Why?
Can the Minister also confirm it will only revoke bank licenses on the ground of “public interest” for the most serious cases of ineffective governance, widespread control failures, pervasive non-compliance, gross misconduct, or serious breaches of applicable law as stated in the Enforcement Monograph.
Approving and removing Controllers
Next, under the new Section 57FD, key appointment holders and 20% controllers of credit card or charge card licensees are to be approved as “fit and proper” by MAS before being officially appointed. The definition of “fit and proper” is set out in MAS’ Guidelines on Fit and Proper Criteria.
Can the Minister clarify why, compared to Section 15B where key appointment holders, 20% controllers, 12% controllers and indirect controllers of designated financial institutions have to be approved by MAS, under the new Section 57FD, only key appointment holders and 20% controllers of credit card or charge card licensees have to be approved by MAS?
Can the Minister also share how actively the “fit and proper” requirement is enforced? Have there been individuals that have been denied appointments or removed from their roles for not meeting the “fit and proper” requirement?
Definition of related parties
Lastly, the new Section 27(2) sets out a list of related parties that are subject to MAS’ requirements on related party transactions. This includes at Section 27(2)(e) “any person in a senior management group of the bank”.
MAS has also stated that “senior management group” will include “family members of the executive officers”.
In response to a question on the definition of an “executive officer”, MAS replied that the definition of an “executive officer” is not meant to be descriptive. Instead, MAS expects banks to assess and identify their executive officers. It also stated that it is good practice for the bank to document how it determines the list of “executive officer(s)”.
MAS is seeking to increase its oversight of banks; yet, the strengthened regulations could very easily be circumvented by the banks’ own definition of “executive officer”. It seems strange that we have gone to the effort of strengthening our regulations only to leave the final necessary step in the hands of the banks.
Will MAS consider requiring in subsidiary legislation that banks document how they determines the list of “executive officer(s)” given that it is currently already recommended that banks do so as good practice? This would be preferable to leaving it open-ended and subject to interpretation.
Sir, notwithstanding these clarifications, I stand in support of the Bill.
Watch the speech here
Watch the response by MAS here