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PLC Global Finance update for August 2010: Singapore
Practical Law UK Articles 7-503-1130 (Approx. 2 pages)
PLC Global Finance update for August 2010: Singapore
by Practical Law
| Published on 31 Aug 2010 • Singapore |
The Singapore update for August 2010 for the PLC Global Finance multi-jurisdictional monthly e-mail.
Financial institutions
Banking regulations amended: Implementing MAS proposals for greater scope and flexibility
Allen & Gledhill LLP
On 5 July 2010, the Monetary Authority of Singapore (MAS) issued its response to feedback received on its 16 December 2009 consultation paper entitled "Consultation paper on proposed requirements for bank's private equity and venture capital investments". The public consultation took place from 16 December 2009 to 22 January 2010.
To implement the proposals in the consultation paper, the Banking Regulations have been amended with effect from 5 July 2010. The MAS has also issued a revised version of MAS Notice 630 "Private Equity and Venture Capital Investments" dated 5 July 2010.
Background
Section 32 of the Banking Act prohibits banks from acquiring or holding major stakes in any company without the MAS' approval. This prohibition forms part of MAS' policy, announced in June 2000, of separating the financial and non-financial activities of banking groups.
Regulation 7 of the Regulations excludes private equity and venture capital (PE/VC) investments from the ambit of section 32.
The consultation paper proposed changes in the following areas to provide banks with greater scope and flexibility in their PE/VC investments:
- Scope of PE/VC investments.
- Duration of investments.
- Bank's involvement in management.
The MAS' response to feedback received in each of these areas is briefly set out below.
Scope of PE/VC investments
The consultation paper proposed expanding the current characterisation of PE/VC investments in the Regulations and the Notice to encompass a wider range of investments, in an industry-neutral manner.
The revised scope would regard as being PE/VC in nature those investments where significant stakes are taken in companies with potential for high growth or value creation. The MAS clarified that an investment in a company carrying on a financial business which has such potential would not qualify as a PE/VC investment but also noted that such investment is not prohibited under section 30 of the Act.