Speech by Mr. Kwek Hian Chuan Henry (Nee Soon GRC)
Debate on Securites and Futures Act Bill (No. 01/2017)
1. The amendments in the Securities and Futures Act are a timely refresh to our regulations. Therefore, I rise in support of the motion.
2. I would like to talk about three issues today:
a. Protecting our jobs;
b. Promoting truth in lending and investing; and
c. Promoting financial literacy.
Protect Our Jobs
3. First, let me talk about protecting our jobs in the financial industry.
4. The amendments put forward today strengthen our role as a trusted financial centre.
5. However, our industry is facing many challenges:
a. Our wholesale banking is undergoing restructuring;
b. Our private banking sector is grappling with complex regulations, especially arising from anti-money laundering requirements; and
c. Our mainstream financial industry, as a whole, is being disrupted by the Fin Tech innovation.
6. These challenges have a direct, and immediate impact, on our people’s job security.
7. As such, it is important that we keep
a. both our regulations,
b. and the implementation of our regulations, flexible.
8. For a while after the global financial crisis, there is broad consensus on the regulatory direction. However, uncertainty in the direction has increased recently.
a. After Brexit, it is unclear what the UK financial centre’s role will be for the world and for EU. Logically, UK regulations could change as her role evolves. So there is some uncertainty there.
b. After the US presidential election, it is unclear whether the Dobb-Frank Act still speaks for the future of US regulations.
9. In short, as the trajectory of global regulations is increasingly unclear, we must be wise in the direction and pace of evolution, of our own regulations.
10. We must not front-run the regulations of the world’s leading financial centres, or we will be holding our industry back from serving the needs of developing Asia and beyond.
11. As such, it would be helpful if MAS can provide a perspective on:
a. Firstly, what is MAS’ perspective on the evolution of the US regulations, especially with regards to the Dobb-Frank Act? How do we see UK’s role as a financial centre, and UK’s regulations, evolve? Does the UK’s changing role represent opportunities or challenges for Singapore?
b. Secondly, what is MAS’ view on aligning our regulations to those of the US and UK? How do we factor in the conditions of emerging Asia, as well as the key markets we serve, to ensure our industry stays competitive, so that we can protect our people’s jobs? Can MAS provide specific examples of this?
c. Lastly, for the new framework on Accredited Investors, can MAS assure our industry that there will be adequate implementation safeguards to ensure that our industry has room to adjust?
Promoting Truth in Lending and Investing
12. Next, I will talk about promoting truth in lending and investing. The financial industry is both complex and competitive. This creates some undesirable outcomes.
a. For example, lending cost is advertised differently for different products. It is calculated differently for:
i. housing loans compared to car loans,
ii. car loans compared to credit card loans, and
iii. credit card loans compared to hire-purchase financing.
b. Processing fees and penalty costs for these differing products vary considerably too.
13. Because of all these, consumers have difficulty understanding the true cost of their spending decision.
a. For decisions like buying a house or a vehicle, a miscalculation could have a big financial impact.
14. To protect our consumers, I call for MAS to mandate a simple and uniform way of explaining interest rates and lending costs.
15. Perhaps MAS could study international best practices, including that from the US’ “Truth in Lending” Act. This US act requires lenders to provide important pieces of information, such as the annual percentage rate (APR), the term of the loan, and the total cost of the borrowers.
16. Can MAS share what it considers as the best formula to calculate interest rates, be it APR or EIR or nominal rates, and lending cost, which also includes fees and penalties, to our consumers?
17. Would MAS also consider gradually aligning our companies towards communicating interest rates and lending cost, in a simple and uniform way?
18. Related to truth in lending is transparency and straightforward information on other financial products, such as investments and insurance, that the majority of Singaporeans use. By majority, I refer to non-Accredited Investors, who may not have detailed financial knowledge.
19. Compared to lending products, it is even harder to provide clarity in such products. But I hope that MAS can push forward, even if complexity limits us to taking small steps.
20. Specifically, MAS can gradually get our finance industry to adopt a common language, as well as a straightforward and concise approach, to explaining financial products. We could pay more attention on how the industry explains:
b. Price of product,
c. Processing fees and penalties,
d. Risks, and
e. Duration of product coverage.
Promoting Financial Literacy
21. Finally, I believe now is the time to promote financial literacy to Singaporeans at large.
22. As I talk to many Singaporeans, across differing age and income groups, about financial security, a common theme emerges:
a. For the past decades, many Singaporeans are assured of a steady career and income progression, as well as rising housing values. These provide both financial security and retirement adequacy.
b. With the increasingly uncertain world, the financial cushion that Singaporeans are used to may not be there for all.
c. At the same time, while some Singaporeans are well-informed, wise and prudent in their financial decisions, some are not.
d. And good income or academic qualifications do not always equate to financial prudence or literacy.
23. The upcoming changes to our CPF system are excellent, and forms an important pillar to helping Singaporean save for retirement.
24. However, I believe that now is the time for us to systematically promote financial literacy. This will empower our people to be financially savvy and prudent in uncertain times.
25. Specifically, I have three suggestions:
a. One. Could we explore the mandatory teaching of financial literacy in our tertiary education institutions? If our schools are focused on preparing Singaporeans for the future, then teaching them how to manage their finances is surely an important guarantee for their future.
b. Two. During national service, there are the occasional down time in between trainings. As such, when there is time between training, can MINDEF consider working with voluntary groups like “Money Sense” to teach basic financial literacy for our young men who sacrifice much to serve our country?
c. Three. Can we provide ample opportunities to learn courses on financial literacy under SkillsFuture?
26. Mdm Speaker, in conclusion, while we debate on our Securities and Futures Act today, it is important to go beyond the specific provisions being amended, to broaden our discussions to:
a. What is the right regulatory balance that can protect our jobs?
b. How we can best promote truth in lending and investing? as well as
c. How we can inform our people to make sound financial decisions.
27. I look forward to the responses from MAS. And I stand in full support of the motion. Thank you.