By CONRAD TAN
(SINGAPORE) The Monetary Authority of Singapore (MAS) won’t force foreign banks operating here to set up local subsidiaries or separate their retail banking operations from wholesale banking, Trade and Industry Minister Lim Hng Kiang said yesterday.
But he added that there were ‘clear benefits’ for foreign banks with a large retail presence to operate their retail business under a locally incorporated subsidiary.
Most foreign banks here – including Standard Chartered, HSBC and Maybank – operate in Singapore under a universal branch model, offering retail, commercial and investment banking services through their branches without needing to legally separate those activities.
‘MAS has a long history of permitting the universal branching model and we continue to support it,’ said Mr Lim, who is also MAS deputy chairman, at the Association of Banks in Singapore’s annual dinner last night.
‘The universal branching model provides significant efficiency benefits for banks’, allowing them to share management resources and capital across different business lines and to pool risks across their entire group, he noted.
Branches can also rely on the capital of their parent bank to borrow from the interbank market, which may be difficult for a local subsidiary with a smaller capital base, he added. ‘There are clear benefits, however, for foreign banks with a large retail presence to operate their retail business from a locally incorporated subsidiary.’
Banks that do so would continue to benefit from cost efficiencies associated with a branch structure and minimise changes to their business models.
‘Moreover, by conducting retail activities from a separate locally incorporated entity, the bank will be seen by local retail customers as being strongly committed to the local market for the long term,’ he added. ‘International discussions on this topic are ongoing and MAS is monitoring the debate closely.’
Citigroup is the only foreign bank here that operates its retail banking business through a locally incorporated subsidiary, Citibank Singapore. The bulk of its wholesale banking business – including corporate, investment and private banking – is conducted through two other legal entities, Citibank NA Singapore Branch and Citicorp Investment Bank (Singapore).
Source: Business Times 29 Jun 2011