Financial Services and Markets (Amendment) Bill

Order for Second Reading read.

Mr Deputy Speaker: Deputy Prime Minister and Minister for Trade and Industry (Trade).

3.15 pm

The Minister of State for Foreign Affairs and National Development (Mr Alvin Tan) (for the Deputy Prime Minister and Minister for Energy, Trade and Industry (Trade)): Mr Deputy Speaker, on behalf of Mr Gan Kim Yong, the Deputy Prime Minister and Minister for Energy, Trade and Industry (Trade), in his capacity as the Minister-in-charge of the Monetary Authority of Singapore (MAS), I move, "That the Financial Services and Markets (Amendment) Bill 2026 be now read a Second time."

Sir, MAS' regulatory regime aims to preserve the resilience and soundness of Singapore's financial system. This includes ensuring that distressed financial institutions can be resolved in a manner that preserves financial stability and maintains confidence in our financial system.

MAS is currently able to exercise resolution powers under the Financial Services and Markets Act 2022 to secure such outcomes, including bailing in subordinated creditors of a distressed FI to restore its solvency. To complement these powers, the Bill will allow MAS to impose Total Loss-absorbing Capacity (TLAC) requirements. Under this TLAC framework, Domestic Systemically Important Banks (D-SIBs) in Singapore will be required to hold additional eligible loss-absorbing instruments and other financial resources.

MAS has consulted the industry and public on key details of the TLAC framework, such as the level of TLAC that D-SIBs must maintain; the types of eligible instruments that qualify as loss-absorbing instruments and the types of financial resources that may be treated as TLAC; also, the information on its TLAC that D-SIBs must disclose to the public; and the TLAC implementation timeline.

Sir, our D-SIBs remain well-capitalised, well-managed and continue to serve as strong anchors of Singapore's financial system. The introduction of the TLAC framework forms part of MAS' ongoing efforts to enhance Singapore's resolution regime, so that in the unlikely event of a distressed D-SIB, MAS will be able to act decisively to maintain financial stability.

Sir, the Bill also includes technical amendments to align Singapore's framework on counter-proliferation financing with the updated Financial Action Task Force (FATF) Standards in this area. Currently, MAS' anti-money laundering regime already requires financial institutions to put in place measures to mitigate the risks of financing the proliferation of weapons of mass destruction. Consequently, MAS' supervisory programme over financial institutions similarly covers such risks.

Nonetheless, to ensure technical alignment with updates to the FATF Standards and to sharpen clarity, the amendments will specifically provide that MAS' supervision covers proliferation financing risks in addition to money laundering risks and terrorism financing risks; and that MAS may render assistance to domestic authorities and its counterpart foreign authorities in their supervision of proliferation financing risks.

In addition, arising from these changes, the Bill makes consequential and related amendments to other Acts administered by MAS.

Sir, the amendments in this Bill will strengthen Singapore's resolution framework and ensure our laws are better aligned with international standards relating to countering proliferation financing. Together, they will enhance the resilience of our financial system and support Singapore's position as a trusted international financial centre. Mr Deputy Speaker, I beg to move.

Question proposed.

Mr Deputy Speaker: Mr Shawn Loh.

3.19 pm

Mr Shawn Loh (Jalan Besar): Mr Deputy Speaker, I support the Financial Services and Markets (Amendment) Bill.

Today, I will focus on the portion of the Bill that allows MAS to impose TLAC requirements on systemically important financial institutions. Such banks must hold a minimum buffer of shares and eligible debt. If a bank is failing, MAS can write down this debt, or convert it into shares. The owners of the debt and shares will take a financial loss, before the taxpayer needs to intervene. And our deposits, payments and loans can carry on.

In short, a bail-in from private owners of debt and equity, and not a bail-out from the public tax dollar.

Our banks came through the Global Financial Crisis well. Yet even then, in October 2008, the Government guaranteed all bank deposits of individuals and companies, backed by $150 billion of our reserves. I remember this news vividly, when I was a student in university studying economics and finance. No claims were eventually made. But our reserves were the backstop of last resort.

TLAC would have helped to reduce the risk that we need to draw on our reserves. MAS intends to apply TLAC requirements to seven D-SIBs. This includes our three local banks.

We should be clear: TLAC is not a free lunch. Investors demand a higher return for debt that can be written down. As the amount a bank must hold, grows with every loan it makes, that cost is borne across the entire banking group.

So, I will make four points about the concept of this lunch, inspired by the lunch break that we just had.

First, this is not a free lunch, and it could mean the lunch for others may get more expensive. Let me explain. Could MAS share about whether TLAC will add to our banks' funding costs, and whether it would then increase lending rates to our local companies, including our small and medium enterprises (SMEs)? If it is not yet clear, I suggest that MAS could commit to monitoring this impact.

Second, this is not a free lunch, and if we are overzealous, other people will eat our lunch. This is because TLAC will be implemented across the banking group of D-SIBs, including their overseas operations. And their competitors in those markets may not be subject to the same requirements.

Take Indonesia, where all three of our local banks have subsidiaries. When they compete for a corporate loan in Jakarta, our local banks carry the cost of TLAC. As far as I understand, their local competitors do not face a similar requirement. Only a handful of jurisdictions in Asia, such as Hong Kong, Japan and China, have such requirements. And in the case of China and Japan, I believe they apply mainly to Global Systemically Important Banks (G-SIBs) and not their domestic ones.

The higher the TLAC requirement, the less competitive our banks will be in the region. So, I am glad that MAS has proposed a TLAC requirement of 14% of risk weighted assets (RWA) for D-SIBs, below the 18% required of G-SIBs.

Third, this is not a free lunch, and we must give our banks enough time to digest this lunch. So, I welcome the five-year transition period and the proposal not to add a separate leverage-based requirement, which MAS has noted would only add complexity and compliance costs.

Fourth, this is not a free lunch, and we must make sure those that eat this lunch understand its nutritional value and health risks. In other words, we must protect investors who may not fully understand what they are buying. Loss-absorbing instruments pay a higher return for a reason. They can be written down at the worst possible moment.

When Credit Suisse collapsed in 2023, its Additional Tier 1 bonds, which are TLAC instruments, were wiped out. This included a $750 million bond issued here in Singapore dollars.

I understand that MAS will not allow TLAC instruments to be sold to retail investors. I strongly support this. When we debated the Securities and Futures (Amendment) Bill earlier this year, I said that the uncle and aunty in our heartlands should not be the exit liquidity for private capital. I would add today that they should also not be the shock absorbers of our banking system.

But "not retail" does not automatically mean "sophisticated". Today, Additional Tier 1 bonds in Singapore can be sold to institutional and accredited investors, or in lots of at least $200,000. Accredited investor status depends on wealth or income. Not understanding. An accredited investor may well be an uncle or aunty who has done well in property. And a retiree putting their life savings of $200,000 into one bank bond may simply be hoping for higher returns than a fixed deposit.

Can MAS clarify how the restriction on retail sales will work in practice, including for such large-ticket transactions? I hope banks will be required to take extra care with individuals, especially seniors, checking that they understand these are risky investments and not deposits, and that they carry the risk of being written down to zero at the worst possible time.

So, Mr Deputy Speaker, let me conclude. We want a financial system that is stable, sound and thriving. Our banks are a rightful source of national pride. But when things go badly, as they will from time to time, those who shared more in the upside must also have skin in the game on the downside. A system where profits are private, but losses are public is not a fair deal for Singaporeans. The taxpayer should never be left carrying the can alone – and this Bill helps to ensure that.

So, we have rightfully introduced legislation to provide for TLAC. For the last time in my speech, this is not a free lunch. In its implementation, I hope the MAS can take my comments into account. So that, in the words of our younger generation, we will not be "cooked". I support the Bill.

Mr Deputy Speaker: Mr Kenneth Tiong.

3.28 pm

Mr Kenneth Tiong Boon Kiat (Aljunied): Deputy Speaker, half of this Bill deals with what happens if one of our big banks fail. A bank's first cushion against losses is its capital, mostly shareholders' money. If losses ever used that up, the Government will have to choose between letting the bank collapse, taking deposits and payments with it, and rescuing it with public money.

This Bill lets MAS require our banks to hold a second cushion called the Total Loss Absorbing Capacity, special debt that can be written down or turned into shares if a bank fails, so that its own investors rescue it rather than the public. It is called a bail-in, which MAS already has the power to do.

The second cushion is meant to ensure that there is enough such debt to give a failed bank fresh capital and to keep it serving customers while it is restructured. The Financial Stability Board wrote this Standard in 2015 for the world's largest banks. MAS proposes that capital and this debt, together, come to at least 14% of RWA, and our three local banks already meet it.

The Bill also writes proliferation financing, the funding of weapons mass destruction into the Act alongside money laundering and terrorism financing.

Sir, I have five questions and one proposal.

The first concern is the measure. The Standard is the Financial Stability Board's but the measure it uses is the Basel Committee's. That Committee is where bank supervisors from 28 jurisdictions, MAS among them, agree how much capital banks must hold. MAS' own consultation says the Board developed the Standard in consultation with the Basel Committee.

The cushion is 14% of RWA, which is a Basel number, so any disagreement over Basel bears on this Bill, and there is a disagreement. The United States (US) Federal Reserve's Vice Chair for Supervision describes America's approach as tailoring, "requirements to the US financial system, rather than adopting international standards wholesale."

America's proposed version of the final Basel reforms would lower its largest banks core capital requirements by about 5%. Britain has delayed them to 2027 and the European Union has put a temporary multiplier on its trading book rules to protect its banks. Singapore implemented the final reforms in July 2024, ahead of Europe, Britain and America. By the Basel Committee's latest figures, they raise required capital by 3.6% outside Europe and the Americas, against about 1% in each of them. At DBS, the floor in those reforms would add about $50 billion of RWA by 2029, largely, the bank says, because of its lending to companies.

I am not arguing for leaving the club. A small financial centre lives on its reputation and a clean Basel grade lets foreign supervisors rely on ours. But when the rule's authors step back, we should say which course we are on: the text on the Committee's timetable, or what the largest members are actually practising.

So, my first question: what is Singapore's Basel strategy now that the largest members are departing from the text?

The second concerns what that measure leaves out. The cushion is 14% of RWA. Think of RWA as a measuring tape that counts each asset by how risky the rules say it is. On that tape, government bonds rated AA minus or better count as zero, or close to it, however many a bank holds, US Treasuries included.

Nearly all of Silicon Valley Bank's loss sat in bonds the rules counted at zero or one-fifth. MAS' consultation points to "the failure of several US banks in 2023", Silicon Valley Bank among them. It had put its deposits into long-dated government-backed bonds, booked at the price it paid. When rates rose, as rates are rising now, those bonds lost about US$15 billion, and none of its ratios showed it: its capital ratios were above every minimum, and its leverage ratio, capital against everything it held, was 8.1% against a floor of four.

When its depositors, nearly all uninsured, pulled out US$42 billion in a single day, the loss could no longer wait. Nor was it alone. At the end of 2022, American banks carried about US$620 billion of paper losses on their bonds and in the end the Federal Reserve lent against those bonds at face value. The loss no ratio counted ended up as public risk.

Our banks are better placed than Silicon Valley Bank was, and MAS already makes them publish what a rate shock would do: at DBS, a rise of around two points costs $1.7 billion, or 2.8% of its core capital. The banks' accounts say how much of their government bonds they carry at cost: about $86 billion across the three. But they do not say what those bonds are worth today, which governments issued them, or what the system would lose on them together. And this is a question of systemic concern.

My second question: will MAS require our systemically important banks to publish every half year, on a common template, their government bond holdings country by country and the market value of the bonds they carry at cost? And will MAS publish the same for the whole system?

The third concerns whether the cushion would work when needed. The answer depends on things beyond this Bill. The Financial Stability Board's own report in January says challenges persist in "funding in resolution and effective bail-in execution, particularly in cross-border contexts". Credit Suisse shows what that means.

In March 2023, Switzerland arranged UBS' takeover of Credit Suisse, backed by public guarantees, and its regulator wrote off about CHF16.5 billion of the bank's Additional Tier 1 bonds, designed to absorb losses, while shareholders were paid. The order rested partly on an emergency ordinance, not on Switzerland's resolution regime, its law for handling a failing bank in an orderly way, which the Financial Stability Board later said offered "an executable alternative".

The same week, the Bank of England did use its resolution powers on Silicon Valley Bank's British arm. It sold the bank to HSBC for one pound, protected depositors, used no public money and wrote its loss-absorbing bonds down to nothing.

The Swiss write-off came undone at home. In October 2025, a Swiss court revoked the order, finding the bonds' own trigger had not been met and no statute authorised it; the ruling is under appeal and the bonds are still worthless. Abroad, bondholders lost in New York, where courts held Switzerland immune, and investors from Japan, Hong Kong and Singapore have turned to investment treaties. And the doubt spread to all such bonds: within three days, regulators in the EU, Britain, Hong Kong and Singapore had to say publicly that, under their own rules, shareholders would take losses first.

My colleague Jamus Lim will ask whether bonds like these should still count towards the cushion.

I draw three lessons. First, the legal basis must be clear. The bail-in power is in statute, and this Bill adds the cushion.

Second, recognition must be agreed in advance, and it runs both ways. Part of this cushion will probably be sold abroad. DBS raised US$2 billion in March, and MAS allows the debt to be governed by foreign law, so a bail-in of it would rest on contract clauses and if challenged, on a foreign court. Our own law is rightly careful here: section 103 lets MAS recognise another country's resolution only if that would not harm our financial system, treat our creditors unfairly, go against the public interest, or cost Singapore money.

Every other country is entitled to the same care, since we are a host as well as a home. MAS proposes that foreign banks' Singapore subsidiaries hold 75% to 90% of their requirements, a figure the Financial Stability Board says should be set "in consultation with the home authority". Clear, published criteria on our side make it easier for others to agree theirs.

Third, who holds the new layer affects whether it will be used. DBS carries almost no Additional Tier 1, about $1 million, and OCBC and UOB about $1.7 billion and $3.4 billion. The new layer will be mostly new debt, and its holders are not yet known. MAS will keep bail-in debt sold to retail investors in Singapore out of the new layer, because concern over imposing losses on them "may delay decisions relating to bail-in". But such bonds can still be sold here to accredited investors, including individuals who meet an asset or income test, and to retail investors abroad.

So, my third question: has MAS' resolution planning for DBS, OCBC and UOB been tested for legal recognition wherever it would need to be enforced? And has the Government assessed whether writing down foreign holders could be challenged under Singapore's investment treaties?

The fourth concerns the Bill's other half, which answers the Financial Action Task Force. Its evaluation of Singapore in May rated us "moderate" on proliferation-financing sanctions. It also found that information on who owns companies is largely not verified beyond the checks firms make on their own customers, and that Singapore "prosecutes few legal persons, local directors and professional intermediaries", which is "not in line with its risk and context". Its roadmap sets Singapore 12 key actions, none of them a new law. My colleague Sylvia Lim will speak to the three on proliferation financing. Two others bear on the companies our banks lend to: verifying ownership in the Accounting and Corporate Regulatory Authority's registries, and pursuing the directors and intermediaries who facilitate money laundering here.

My fourth question: how, and by when, will the Government meet those two?

Finally, a proposal. This Bill prepares for a bank that fails. After 1997, the International Monetary Fund found that our region's banks had "relied on collateral rather than credit assessment and cash flow analysis", and that connected lending made it worse. Cleaning up cost Indonesia's government more than half a year's output. There are those who would answer Asia's banking risks with an Asian Basel: softer capital ratios for Asian conditions. But I think Asian banking requires different advances.

It requires better lending. Asia's problem is often the allocation of credit, not its quantity: bank lending to the private sector is about 118% of gross domestic product (GDP) in Malaysia, 112% in Thailand and 125% in Vietnam. Yet only about one firm in three in Malaysia and Vietnam, and one in seven in Thailand, uses a bank loan to finance investment. A bank in our region will readily lend against another building, and turn away an exporter who has orders in hand but little property to pledge.

Our own SMEs face the same preference: in 2013, 55% of their loans were secured on property; by June this year, about 70% were. Cutting capital requirements across the board would simply finance more buildings. Better borrower information, enforceable claims and guarantees aimed at identifiable risks change where the credit goes.

For the same reason, a regional approach should sometimes be tougher, on connected lending, hidden losses and implicit state guarantees.

Singapore chairs the Association for Southeast Asian Nations (ASEAN) next year. The Prime Minister has said of the region that "there are regulatory restrictions and there are ways in which we can make things more seamless". Credit is one of those ways. Here are three considerations to advance.

First, a firm's repayment record that crosses a border. Take a supplier in Johor that has served Singapore factories for 10 years and never missed a repayment to its Malaysian bank. A Singapore bank cannot easily see that record, so it will tend to ask for property collateral. If credit bureaus in the region shared such records, with the firm's consent and a common way of identifying it, that supplier could show its history here instead of starting from nothing, and our firms could do the same there. In Hong Kong, banks that make more use of firms' shared records charge lower rates and ask for less collateral.

Second, a supervisory view of one corporate group across several countries, for supervisors only. Three borrowers in three countries can turn out to depend on one property group and today, no single supervisor sees the combined exposure. The euro area already does this: its central banks collect data on individual bank loans to companies above €25,000, so supervisors can see a company's borrowing across banks and borders. Enforcement at home, against powerful interests, remains the hard part.

Third, verified trade records, so the same invoice or shipment cannot be financed twice. In 2020, Hin Leong left 23 banks owed about US$3.5 billion, and some of its cargoes had been financed more than once. Our banks have already built such a registry. The Association of Banks in Singapore launched its Trade Finance Registry in June 2023; more than 40 institutions now use it and the ASEAN Secretariat has expressed interest.

We could start with a two-year pilot involving Singapore, Malaysia, Indonesia and Thailand, covering one trade corridor and one cross-border banking group, and publish the results. It would have to be reciprocal: useful information flowing both ways and credible assurances about how each other's banks would be treated in a crisis.

My fifth question: will the Government put such a pilot on the agenda for its ASEAN chairmanship?

Mr Speaker, this Bill makes our banks safer if they fail. The larger work is to make them more useful while they stand. The Basel rules were rebuilt after 2008 around the failures of wholesale-funded, trading-heavy banks, and Asian banks like ours, which lend out their customers' deposits, are not that kind of bank. I hope future legislative energy in banking will focus on rules better suited to an Asian context – rules aimed at how our banks actually lend, and how they would actually fail. Thank you, Sir. I support the Bill.

Mr Deputy Speaker: Mr Edward Chia.

3.40 pm

Mr Edward Chia Bing Hui (Holland-Bukit Timah): Mr Deputy Speaker, I rise to seek clarifications on several aspects of the Financial Services and Markets (Amendment) Bill.

The Bill has two principal limbs.

First, it expressly incorporates proliferation financing into our existing anti-money laundering and counter-terrorism financing framework. Second, and more substantively, it gives MAS the power to impose TLAC requirements on specified financial institutions. I will focus primarily on TLAC.

The principle behind TLAC is straightforward. If a systemically important bank reaches the point where, without intervention, it may fail, there should already be sufficient capital and eligible liabilities available to absorb losses and recapitalise the bank, allowing an orderly resolution while preserving financial stability.

However, the Bill itself does not prescribe either the TLAC ratio or the implementation period. Instead, section 57(B) empowers MAS to determine by written notice the level of TLAC, its method of calculation, the instruments that qualify and the classes of investors to whom these instruments may be issued.

Given the significance of these parameters, I would first ask the Minister of State to state clearly the TLAC ratio that MAS intends to impose on our local D-SIBs and the implementation period envisaged.

More importantly, I would like to understand how these parameters have been derived. Internationally, the Financial Stability Board standard for G-SIBs is a minimum TLAC of 18% of RWA. Our three local banks are D-SIBs rather than G-SIBs, so a Singapore-specific calibration is understandable.

But Parliament should understand what our chosen level is designed to withstand. What broad stress scenarios and assumptions has MAS applied? How much loss absorption does MAS judge necessary before a D-SIB can be successfully recapitalised while maintaining its critical functions? And how frequently will MAS review the calibration?

Our banks' balance sheets, regional exposures and systemic importance will evolve. External risks and international regulatory standards will also change. Will MAS conduct a regular review or are there defined developments that would trigger a reassessment of the TLAC requirement?

My second point concerns regional competitiveness. Our three local banks increasingly operate and compete across the region. A stronger loss-absorption regime enhances their resilience and strengthens confidence in Singapore's financial system. But greater resilience may also come with higher funding costs, particularly if banks need to issue or maintain additional eligible liabilities.

This matters because our local banks increasingly compete against institutions in regional markets where equivalent TLAC requirements may not yet apply. Has MAS assessed the incremental funding cost arising from the proposed TLAC requirement and its implications for the regional competitiveness of our local banks? How does MAS balance being appropriately ahead of the regulatory curve in strengthening resilience, without moving so far ahead that our banks face a material competitive disadvantage as they expand in the region?

There may also be other offsetting benefits. Greater resolution credibility could strengthen investor confidence and reduce the risk premium demanded by markets. How has MAS considered both sides of this equation when determining the appropriate calibration?

My third point concerns the implementation period. I understand that the transition period is intended to allow the TLAC investor base and market to develop in an orderly manner, while avoiding concentrated issuance and pricing pressures. Could the Minister of State explain why the proposed implementation period is considered appropriate for this purpose?

The transition should reflect not merely the ability of banks to eventually meet the requirement, but also the capacity of markets to absorb the necessary issuance in an orderly manner.

First, how will existing capital and debt instruments be treated? Where existing instruments already meet the necessary loss-absorbing characteristics, will they continue to be recognised towards TLAC during the transition?

Second, will MAS expect banks to follow a progressive glide path towards the final requirement? Even with a relatively long implementation period, issuance could become concentrated towards the deadline. That could increase funding costs and several years later, create a corresponding concentration of maturities and refinancing requirements. How will MAS avoid unnecessary issuance concentration and future refinancing cliffs?

My fourth point concerns retail investors. The Bill allows MAS to prescribe the classes of investors to whom eligible TLAC instruments may be issued. This is important because these instruments are deliberately structured to absorb losses when a bank is in serious distress. Could the Minister of State clarify how the restriction on direct retail participation will operate in practice, including in relation to the subsequent secondary market transactions and investment products or bond indices referencing TLAC instruments?

I understand there may be a distinction between a retail investor directly purchasing an individual loss-absorbing instrument and obtaining diversified exposure through a bond index or collective investment product. Could the Minister of State explain the policy basis for this distinction and the safeguards that will apply where retail investors have indirect exposure to TLAC instruments?

There is also a transitional question. How will existing instruments involving retail participation be treated when determining whether they qualify towards TLAC?

My fifth point concerns banking groups with insurance businesses and the future scope of this framework. TLAC internationally has principally applied to banks rather than insurers. For banking groups that also contain significant insurance operations, could the Minister of State clarify how MAS will separate the banking entity's resolution needs from the liabilities and risks of the insurance business when calibrating TLAC?

More broadly, section 57B gives MAS considerable flexibility over the institutions and requirements covered by the framework. If MAS subsequently exercises this broader power to extend TLAC requirements materially beyond the banking institutions presently contemplated, would MAS undertake a fresh public consultation before doing so?

Finally, I have a point on transparency and regulatory predictability. Section 57B allows MAS to impose different requirements on different classes of institutions and to vary requirements for an individual institution. It also provides that such notices need not be published in the Gazette.

I understand why institution-specific prudence information may need to remain confidential. But where requirements apply generally to a class of institutions, can the Minister of State confirm that the applicable framework, including the broad calibration methodology, implementation principles and requirements applying across that class, will be made publicly available?

Regulatory flexibility is important, but consistency and predictability are also strengths of Singapore as an international financial centre.

Mr Deputy Speaker, the principle behind TLAC is sound. A systemically important institution should have sufficient resources before a crisis occurs so that losses can be absorbed, the institution can be recapitalised and the critical financial services can continue. The key questions are therefore what level is sufficient, how that level has been derived and will be reviewed and how quickly our banks should reach it, and how we ensure that greater resilience does not unnecessarily compromise their ability to compete regionally.

Mr Deputy Speaker, notwithstanding my clarifications, I support the Bill.

Mr Deputy Speaker: Assoc Prof Jamus Lim.

3.49 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Deputy Speaker, the proposed amendments to the Financial Services and Markets Act seeks to confer to MAS two new powers: the ability to impose on financial institutions a minimum level of TLAC and to allow the authority to contain proliferation financing for weapons of mass destruction. I will confine my remarks to the first of these two elements.

The amendments build on a series of financial stability measures that MAS has enacted in concert with the Basel III banking reforms, which emerged in the wake of the 2007/2008 Financial Crisis. In Singapore, the final reforms – the so-called Basel Endgame – culminated with MAS Notice 637 late last year and is expected to be fully phased in by 2029.

The latest TLAC requirements, however, appear to be distinct, focused on D-SIBs. In particular, the standards were established by the Financial Stability Board for Global Systemically Important Financial Institutions (SIFIs), and MAS' TLAC requirements appear to build on this framework.

Sir, in pursuing these regulations, the goal is to ensure financial stability in our economy, while not imposing excessively onerous burdens on the banking system. On its face, I fully subscribe to these objectives. Even so, I have certain reservations about some of the parameters chosen for TLACs, which I hope to have further clarity from the Government.

First, I will note that MAS has chosen an external TLAC set at 14% of RWA. This is 4% lower than the 18% stipulated by the Financial Stability Board, which MAS has justified by appealing to how our D-SIBs are, "smaller in size and have different risk profiles."

But while this claim may ring true for our local large banks – DBS, OCBC, and UOB – at first glance, this is not actually applied to the other D-SIBs with a presence here, including HSBC and Citigroup.

I understand that these foreign banks may already be subject to more stringent TLAC requirements, based on their home regulator, and especially if they are also designated as a material subgroup of their parent institution. Hence, they may well already be required to adhere to a higher percentage holding of RWA than this 14%. Still, this does not fully absolve us from requiring an equivalent higher standard for our local D-SIBs.

Let me explain why. After all, DBS' market capitalisation is not that much smaller than that of Citigroup's, and larger than that of other globally systemically important institutions. And OCBC's size is close to twice that of Standard Chartered's. Given the range of financial market activities our local banks already engage in, it seems hard to reconcile the notion that our banks are really smaller and less risky than their global counterparts.

Second, MAS spells out a list of criteria for what qualifies as a TLAC instrument – 11 conditions, by my count. These include Tier 1 and Tier 2 capital. While this is not the place to question the appropriateness of what the industry has chosen to classify as high-quality capital, I wish to add a note of caution, based on two recent developments.

The first concerns how Contingent Convertible bonds (CoCos) failed to act as Additional Tier 1 capital during the resolution process for investment bank Credit Suisse. Notably, the Swiss Financial Market Supervisory Authority announced, as part of the emergency package put together at the time, that CoCos would be written down to the tune of $17 billion.

Setting aside whether this constituted a violation of the seniority of claims between debt and equity, the point remains that an instrument that had hitherto been widely regarded as Tier 1 capital failed to fulfill its function in a moment of crisis, the time when it is most needed. It would be helpful to clarify MAS' own position on the matter, especially with regard to whether it could envision a situation where it, too, might choose to write down CoCos. And if so, does it still adjudge such instruments as legitimate constituents of a bank's TLAC?

Second has to do with how the dollar and US Treasuries – long regarded as the quintessential risk-free asset – are increasingly confronting questions about their credibility. The dollar, along with dollar-denominated assets, have long retained a privileged position in international finance and financial markets. Consequently, few questioned the safe-asset status of such instruments and undoubtedly, such holdings would comprise a nontrivial share of our D-SIB's TLAC capital.

Yet the eroding status of the dollar as a safe asset, especially for global liquidity purposes, must surely prompt us to ask whether it is time for a re-examination of weight of dollar-denominated holdings that we require in TLAC buffers.

My third question has to do with the current status of our local D-SIBs. Observers have suggested, previously, that our big three local banks have substantial capital buffers and should have no issues with taking on board the fully loaded set of Basel Endgame rules. Analysts have, similarly, pointed out how the current global interest rate environment appears to be favourable for banks' balance sheets and overall performance.

Keeping in mind the market sensitivity of revealing the full extent of each institution's holdings of TLAC assets, it would nevertheless be useful to understand the MAS' view of their overall balance sheet health. Will the Government be able to share whether these institutions have, historically, been well-capitalised, or at least sufficiently capitalised and that this step is mainly a precautionary measure, to align them with international macro-prudential standards?

Sir, let me take a step back and speak on the more general problem that the Bill is attempting to solve. Ultimately, policy-makers pursuing financial stability must recognise that they are able to do so alongside only either financial policies that are determined nationally or continued financial integration with the rest of the world.

This amounts to a trilemma: we can choose two of these three laudable objectives, but ultimately one must give.

Ensuring financial stability is, of course, unobjectionable, especially given the size of the financial sector in our economy. Continued financial integration is also, by and large, to be expected, especially for an international financial centre, such as ours. So long as these two goals remain immutable, this leaves us with the need to constantly be willing to compromise on national financial policy, to best align with global standards.

This may mean adopting standards that may not always seem suitable for our national context, such as an 18% TLAC buffer, rather than the proposed 14%, or limiting the type of instruments that can be applied to the TLAC, as MAS appears to have concluded, in disallowing instruments held by retail investors. It could also mean being willing to expose our local big three banks to greater winds of global competition.

We will undoubtedly face future choices of this nature, where we will be called to compromise our sovereign financial policies, in favour of our continued status as a global financial centre in good standing.

So, perhaps the relevant question we should be asking is: is this sacrifice worthwhile? It could well be. But we must be clear-eyed, as policy-makers, about the trade-offs we are making in fulfilling our aspirations as a leading global financial centre, as today's Bill amply illustrates.

Mr Deputy Speaker, some may claim that there is an essential trade-off between the pursuit of financial stability through stringent regulation, versus sustaining a competitive financial system through regulatory laxity.

In my view, this is a false dichotomy, and this is where I depart from the arguments made by the hon Member Shawn Loh. More often than not, the unmitigated short-term pursuit of profit by banks can end up endangering their long run solvency and viability, as well as that of the financial system as a whole. We should not yield to such red herrings and instead, continue to hold our domestic banks to the standards required of an international financial centre.

The stipulations provided for in these proposed amendments make headway in that regard, and for that reason, there is no reason to object to them. Notwithstanding my clarifications, therefore, I support the Bill.

Mr Deputy Speaker: Ms Sylvia Lim.

3.59 pm

Ms Sylvia Lim (Aljunied): Mr Deputy Speaker, this Bill amends the Financial Services and Markets Act in two areas.

My -arty colleagues, Kenneth Tiong and Jamus Lim, have focused on the proposed TLAC requirements. For my part, I would speak on the amendments relating to countering proliferation financing.

Sir, these amendments are short and simple. Clauses 5, 6 and 7 expand MAS' current powers to issue directions for the prevention of money laundering and terrorism financing as well as to provide assistance to foreign and domestic agencies by permitting MAS to do the same for proliferation financing. These amendments are supportable in so far as they make it explicit that countering proliferation financing is as important as countering money laundering and terrorism financing. However, I have three queries that I would like to seek the Ministry's clarifications on.

First, on the definition of proliferation financing. Clause 2 of the Bill simply states that proliferation financing means the financing of the proliferation of weapons of mass destruction. This definition appears to be different from the definitions used in the United Nations Security Council (UNSC) Resolutions on the subject, such as Resolution 1540. Such resolutions talk about proliferation to refer to not just the weapons themselves, but their means of delivery, such as ballistic missiles, cruise missiles, strategic aircraft and unmanned aerial vehicles. Clearly, weapons would be useless if they cannot be effectively delivered, which makes the control of such means of delivery equally important.

Could the Minister of State clarify why the definition of proliferation financing omits the mention of means of delivery? Is the Government's intention to also curtail financing of such means of delivery?

Sir, while I have just queried whether the definition of proliferation financing is incomplete, a second observation I would make is that it is, in another sense, very broad.

To that end, it is useful to clarify what the scope of our obligations towards countering proliferation financing is. The FATF's Recommendation 7 on this issue merely requires countries to implement proliferation financing related targeted financial sanctions made under UNSC Resolutions.

Currently, the UNSC resolutions from proliferation are focused on North Korea and Iran. However, there are other established nuclear powers which do not come under UNSC sanctions. By leaving the definition broad without scoping it to UN-sanctioned countries, is the intention to possibly impose on the financial sector obligations beyond the UNSC-sanctioned countries?

The third query is an overarching one. What is the real impact of the counter proliferation amendments in the Bill? Put another way, does it change anything? At first glance, the amendments may give the impression that this Bill is needed because the MAS did not have regulatory powers to prevent proliferation financing, unlike for money laundering or terrorism financing. However, after some research, I realise that MAS had previously issued directions on proliferation financing, by defining it as a subset of money laundering. For example, in MAS Notice 626 and Notice PSN02, banks and digital payment token service providers would have observed footnotes stating that references to money laundering would include proliferation financing.

I am therefore unsure why the Bill's counter-proliferation financing provisions are before the House today, given that MAS has been issuing directions to that effect already. Could the Minister of State please elaborate on what additional powers it grants that the MAS does not already have? Or are the amendments simply send a signal that the Government is as serious about countering proliferation financing as it is about curtailing money laundering and terrorism financing?

Lastly, Sir, I would like to conclude my speech by reflecting on the FATF's latest mutual evaluation report issued this year regarding Singapore's counter-proliferation efforts. I had filed a Parliamentary Question in July on this subject.

FATF was quick to point out that Singapore was vulnerable to proliferation financing due to several factors: its geographical position, its status as an international financial centre, and the fact that it was a hub for trade, transport, maritime and virtual assets. Among FATF's observations was that even among the "Competent Authorities" in Singapore, there was an uneven understanding of the risks of breaches and evasion of proliferation financing sanction obligations; it was observed that the MAS, the Commercial Affairs Department and the Ministry of Foreign Affairs appeared more au fait with the subject than other agencies.

FATF's overall conclusion was that Singapore had a strong legal framework for targeted financial sanctions relating to proliferation financing. Where we fell short, however, was in terms of supervisory coverage, or in other words, how the agencies used the supervisory and enforcement powers they already have.

The report also highlighted the risk posed by the maritime sector: representation offices of some foreign flag states had low awareness of the counter-proliferation financing risk obligations, while Singapore's own risk assessment acknowledges that ship-to-ship transfers are a key risk.

There was a further observation that the penalties for failing to comply with these obligations are, quote, "relatively low and cannot be considered proportionate and dissuasive in all cases", unquote.

Sir, it is my impression that many of FATF's concerns about proliferation financing in Singapore are not addressed by the Bill and remain work in progress. I do not dismiss the size of the task ahead. That said, the Bill does signal the criticality of tackling proliferation financing, and I support it.

Mr Deputy Speaker: Dr Hamid Razak.

4.05 pm

Dr Hamid Razak (West Coast-Jurong West): Mr Speaker, Sir, I rise in support of the Financial Services and Markets (Amendment) Bill.

Singapore's success as an international financial centre rests on trust: trust that our institutions are sound, that our regulatory framework keeps pace with emerging risks, and that when problems arise, we can contain them before they threaten the wider economy. For most Singaporeans, this trust is rarely noticed. It is simply the confidence that their savings are safe, that their payments go through and that their bank will be there tomorrow.

I would like to raise three points, all concerning one idea: resilience before crisis.

Mr Deputy Speaker, Sir, my first point concerns the new requirements on TLAC. The concept may be technical, but the principle is straightforward. If a systemically important financial institution runs into serious difficulty, it should hold enough resources of its own to absorb losses and be re-capitalised in an orderly way. This matters because a major financial institution does not fail like an ordinary company. Its failure can spread to depositors, businesses, other financial institutions, payment systems and ultimately, the wider economy.

I therefore support the MAS having the power to require these institutions to build such buffers before a crisis hits them, not during one.

I would, however, seek clarification on how the requirements will be calibrated. There is a balance to strike. Too little loss-absorbing capacity exposes our financial system to unnecessary risk. Yet requirements set well above what is needed could raise funding costs for institutions. These may eventually be passed on to households and businesses, through higher rates on home and business loans, or other charges.

Can the Minister of State elaborate on the principles MAS will apply in setting TLAC requirements, how our approach compares with other major international financial centres and whether the requirements will be phased to give institutions time to adjust?

Mr Deputy Speaker, Sir, my second point concerns transparency. The Bill allows MAS to require institutions to disclose the level and composition of their loss-absorbing capacity and how the relevant instruments would rank in a winding-up. I welcome this.

Financial stability depends not only on sufficient capital, but also on market participants understanding who bears losses, in what order and in what circumstances. This matters all the more if such instruments are available to individual investors. To many of them, a product issued by a familiar bank can feel as safe as a deposit, even when it is not meant to be.

The Bill also allows MAS to specify the classes of investors to whom such instruments may be issued. Could the Minister of State clarify whether MAS intends to use this power to limit retail access? And where retail investors may still hold these instruments, will there be additional safeguards to ensure they understand that loss-absorbing instruments carry very different risks from ordinary deposits? We should avoid a situation where an instrument performs exactly as designed in a crisis, but its investors had never fully appreciated that they were expected to absorb those losses.

My final point, Mr Deputy Speaker, concerns the Bill's explicit provision for countering proliferation financing. I strongly support this. As one of the world's most connected financial and trading centres, Singapore is inevitably exposed to financial flows that cross jurisdictions and supply chains. Our responsibilities therefore extend beyond conventional money laundering and terrorism financing. Keeping our financial system from being used to finance the development or proliferation of weapons of mass destruction is a national security responsibility and an important part of Singapore's reputation as a trusted financial centre.

But compliance is growing more complex, particularly for smaller financial institutions. Will MAS provide sufficient guidance, information-sharing and capability-building, including practical examples of warning signs, so that institutions can identify proliferation financing risks effectively, rather than treat this as another compliance exercise?

Mr Deputy Speaker, Sir, the common thread in these amendments is resilience before crisis. We want financial institutions to have the resources to absorb their own losses before difficulties spread. We want investors to understand the risks they take on. And we want our institutions to detect emerging threats before our financial system can be exploited.

These safeguards work largely out of public view. Most Singaporeans will never notice them – and that is the point. These are what allow Singaporeans and international investors to keep their confidence in our financial system when circumstances turn difficult. With these clarifications, Mr Deputy Speaker, I support the Bill.

Mr Deputy Speaker: Mr Saktiandi Supaat.

4.11 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): First, I would like to declare that I am employed by a bank designated by MAS to be a D-SIB in Singapore.

As Singapore continues to anchor its position as a leading global financial centre, our regulatory frameworks must evolve in tandem with international standards and emerging systemic risks.

This Bill makes important updates to the Financial Services and Markets Act passed in 2022. By empowering MAS to impose TLAC requirements, and explicitly addressing the prevention of proliferation financing, we are taking further steps to safeguard the resilience and integrity of our financial system. I support both thrusts of the Bill.

My questions are mainly about calibration and implementation, how we strengthen the resilience and financial integrity without introducing unnecessary friction into the financial system and the real economy.

Let me first address the introduction of TLAC requirements for Division 6 Financial Institutions, including our D-SIBs.

Following the Global Financial Crisis, G-SIBs have been required to maintain TLAC of at least 18% of their total RWA. TLAC provides an additional layer of loss-absorbing capacity so that, if a systemically important institution fails, sufficient resources are available to support its orderly resolution and recapitalisation, while minimising the need for taxpayer support.

My first question concerns the timing and calibration of the framework. Could the Minister of State explain why MAS considers this the appropriate juncture to introduce the TLAC requirements for our D-SIBs and what developments have informed the timing?

I also note that MAS' May 2026 consultation paper proposes a TLAC requirement of 14% of a D-SIB's RWA. Could the Minister of State explain the considerations behind the 14% calibration – I heard different Members earlier talking about this – but the question I have is how MAS assesses that this provides sufficient loss-absorbing capacity given the size, complexity and cross-border activities of our D-SIBs?

Second, I would like to ask about the potential impact on funding costs and the real economy. Implementing TLAC requirements will inevitably affect banks' funding and capital structures. If institutions need to issue additional loss-absorbing instruments, there is a possibility that some of these costs could ultimately be transmitted to borrowers.

How will MAS monitor this to ensure that our SMEs, many of which rely significantly on bank financing, do not face an undue tightening of credit or materially higher borrowing costs, in the worst case scenario? Relatedly, has MAS assessed whether Singapore's capital markets have sufficient depth and investor capacity to absorb additional TLAC issuance by our D-SIBs without materially increasing funding costs or creating concentration risks?

As we strengthen the resilience of our financial system, we should also be mindful that the transition itself does not create unintended pressures elsewhere in the system.

Third, I would like to clarify the potential future scope of these powers. The legislative amendments confer broad powers and do not limit the imposition of TLAC requirements to D-SIBs. Beyond D-SIBs, does MAS envisage these TLAC powers being applied in future to other systemically important financial institutions, including insurers? If so, what criteria would MAS consider before extending the framework to another category of institution?

Fourth, on implementation, MAS' May 2026 consultation paper proposes to give D-SIBs five years from receiving notification to meet their TLAC requirements. Could the Minister of State provide more colour on the milestones and transition arrangements during this period? A phased and carefully calibrated timeline would allow institutions to adjust their balance sheets without causing unnecessary disruption to domestic credit conditions.

Finally, systemically important banks operate globally. How will MAS coordinate the activation of bail-in powers and TLAC requirements with foreign regulatory authorities? Regulatory fragmentation during a crisis can exacerbate uncertainty. Effective coordination between home and host authorities will therefore be critical to achieving an orderly resolution.

Mr Deputy Speaker, Sir, let me now turn to the second major pillar of this Bill, explicitly providing for the prevention of proliferation financing.

Singapore is a member of FATF and is assessed against FATF Standards. These standards were updated in 2020 to explicitly require financial institutions and non-financial institutions to identify and mitigate proliferation-financing risks. Singapore's reputation as a trusted and clean financial hub is a valuable asset. Aligning our legislative framework with evolving international standards is therefore important.

At the same time, we should recognise the operational complexities involved. Tracing proliferation financing can be particularly difficult. Bad actors may use opaque corporate structures and transactions involving dual use goods, items with both civilian and military applications. As a major global trade and transshipment hub, Singapore and our financial institutions are inevitably exposed to such risks. This raises two issues.

First, while larger financial institutions may have the resources to deploy sophisticated surveillance and analytical systems, smaller institutions and local firms may face proportionately higher compliance costs. What targeted guidance, capacity-building measures or other support will MAS provide to help the broader industry adapt? We should ensure that firms can meet these important obligations without facing disproportionate compliance burdens.

Second, there is the question of how technology and information sharing can strengthen detection. In 2023, Parliament passed legislation establishing the Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases (COSMIC) platform, to facilitate the sharing of customer information between financial institutions to combat money laundering and terrorism financing. Could the Minister of State clarify whether the existing COSMIC framework, or similar information sharing arrangements, could eventually support the identification of proliferation financing typologies and red flags, while maintaining appropriate legal safeguards?

More broadly, does MAS see scope for greater use of shared analytics, AI and network analysis across financial institutions to identify proliferation financing patterns that may not be visible to an individual institution? Given the increasingly sophisticated and cross-border nature of such networks, there may be value in looking beyond institution-by-institution surveillance towards system-level detection capabilities.

Finally, as we update our definitions and regulatory reach across multiple Acts, including the Variable Capital Companies Act, will MAS provide consolidated guidance to help the industry navigate the interaction between money laundering, terrorism financing and proliferation financing requirements?

Mr Deputy Speaker, Sir, safeguarding our financial system is not a static goal. The nature of financial risks will continue to evolve and our regulatory architecture must evolve with them. The amendments before us strengthen Singapore's ability both to deal with the failure of systemically important institutions and to prevent our financial system from being exploited for proliferation financing.

The key, in my view, is calibration. We should ensure that our financial institutions have sufficient capacity to absorb losses without placing taxpayers at undue risk. At the same time, implementation should avoid unnecessary consequences for credit availability, market functioning and legitimate economic activity. Similarly, we must maintain high standards against financial crime and proliferation financing while ensuring that the compliance framework remains proportionate, technologically capable and responsive to emerging risks. If we get this balance right, Singapore can continue to be not only a resilient financial centre, but also a trusted and sustainably competitive one.

Mr Deputy Speaker, Sir, notwithstanding my queries, I support the Bill.

Mr Deputy Speaker: Minister of State Alvin Tan.

4.20 pm

Mr Alvin Tan: Mr Deputy Speaker, I thank Members for supporting the Bill. Let me first address their questions on TLAC, followed by the comments on amendments on counter-proliferation financing.

On the TLAC amendments, please allow me to first clarify details about the TLAC framework, such as why MAS is doing this now, which entities will be subject to TLAC requirements, and how it will be implemented. I will also address technical points that Mr Saktiandi Supaat and Mr Edward Chia raised.

Mr Deputy Speaker, MAS' decision to implement TLAC now is part of our ongoing efforts to strengthen our resolution regime. Our banks are well-capitalised, well-managed and form strong anchors of Singapore's financial system.

G-SIBs have complex global operations and their failure will impact many jurisdictions across the world. D-SIBs' impact is more limited, given they have less complex domestic or regional operations.

When the Financial Stability Board first developed TLAC in 2015, it targeted G-SIBs and not D-SIBs. MAS decided to first study the impact of such a measure and the implementation experiences of peer jurisdictions that allowed us to better calibrate the TLAC requirements that is most appropriate to Singapore and our Singaporean context.

The Bill empowers MAS to impose TLAC requirements on "Division 6 Financial Institutions". This term is defined in Regulation 27 of the Financial Services and Markets (Resolution of Financial Institutions) Regulations 2024 to include banks and insurers incorporated in Singapore, including their financial holding companies.

MAS intends to implement TLAC requirements only for banks, more specifically D-SIBs, at this time. And there are currently no plans to extend the TLAC framework to insurers. Although, should future circumstances change, MAS will consult before imposing TLAC on insurers. Where banking groups have insurance subsidiaries, these insurance subsidiaries are already subject to separate capital requirements.

Within the five-year implementation period, there is no interim or yearly TLAC milestones that banks must meet. This gives banks flexibility to plan their TLAC issuances over these five years. MAS will monitor that the banks do not backload the implementation and crowd issuances in the last year. Banks' existing capital instruments that already meet all eligibility criteria will be recognised as TLAC even during this implementation period.

D-SIBs must, however, start reporting and disclosing their TLAC issuances earlier, as this information will be important and relevant to investors. MAS will specify how we expect D-SIBs to comply with these mandatory reporting and disclosure requirements in the Notice.

This Notice will also clearly detail how MAS will apply TLAC requirements to the D-SIBs, and this will be subject to public consultation and published on MAS' website. Any review of the TLAC framework, be it as part of MAS' regular review or arising from developments in international regulatory standards, will also be subject to public consultation. This speaks to Mr Edward Chia's point on importance of transparency.

Let me next address questions by Mr Shawn Loh, Mr Saktiandi Supaat, Mr Edward Chia and Dr Hamid Razak on the cost and competitiveness implications of TLAC implementation. I will also address concerns raised by Assoc Prof Jamus Lim, who had asked why we had not gone with an 18% TLAC and also concerns over concentration in the USD and the TLAC instruments, including Contingent Convertible bonds.

Sir, even as we ensure banks are not under-insured, we should also equally ensure they are not over-insured. This is why MAS proposed a TLAC requirement at 14% of banks' RWA and this is lower than the 18% requirement for G-SIBs and for D-SIBs in peer jurisdictions, like the EU, Australia and Canada.

How did we come to 14%, and not 18%? Well, MAS struck this balance after carefully studying the impact on funding cost, which is a point that many Members have raised. At 14%, the value of new TLAC instruments to be issued is manageable. And at 14%, we expect our local banks will have sufficient capacity to withstand severe losses in stressed scenarios while not being burdened with excessive increases in funding costs that are not commensurate with their size, risk profiles or business models.

Our D-SIBs which are subsidiaries of G-SIBs will also be subject to TLAC requirements of at least 75% of the 18% TLAC requirements that they would have been required to hold if they were standalone G-SIBs, which is 13.5%. It will help our D-SIBs remain competitive and mitigate against increases in credit costs while not compromising on financial stability.

Sir, let me next address concerns that Mr Shawn Loh, Mr Edward Chia and Dr Hamid Razak raised on retail investment in TLAC instruments.

TLAC instruments are inherently complex and risky, which makes them generally unsuitable for retail investors. While these are effectively debt instruments issued by our banks that contain "bail-in" clauses, allowing a write-down if MAS has assessed that the bank has failed or is likely to fail, these instruments differ from traditional investment products because they are designed to primarily absorb losses during bad times. This means it is extremely difficult to predict the circumstances where investors of TLAC instruments may be required to suffer losses. One instance is the failure of Credit Suisse in 2023, that Mr Shawn Loh, Mr Kenneth Tiong and Assoc Prof Jamus Lim raised.

Sir, excessive retail investment in a bank's TLAC instruments can prevent decisive intervention. Where a substantial portion of a bank's TLAC instruments is held by retail investors, the need to quantify and consider the impact on these retail investors suffering full losses could delay MAS' bail-in decisions to the detriment of the broader financial system and the public.

So, in taking this into consideration, it is desirable to restrict retail investment in TLAC instruments. In fact, MAS has already implemented three sets of measures to restrict retail investments in banks, Additional Tier 1 and Tier 2 capital instruments, which can be bailed in and count towards a bank's TLAC, across both the primary and the secondary markets. MAS will apply the same measures to banks' TLAC instruments.

First, MAS will not allow any TLAC instruments that are issued directly to retail investors to count towards a bank's TLAC. This creates a straightforward disincentive for banks to issue these instruments to retail investors in the primary market.

Second, MAS will make it clear to financial institutions in Singapore that they should not distribute TLAC instruments issued by banks incorporated in Singapore, or investment products that reference these TLAC instruments to Singapore retail investors or facilitate their access to these products.

And then, third, the Fair Dealing Guidelines that apply across the financial sector require all financial institutions to treat all customers fairly in the design, marketing, sale and servicing of products and services. MAS expects financial institutions to only market or offer financial products or services they have assessed to be suitable for their target customers.

Together, these measures aim to restrict the purchase of TLAC instruments to investors who are able to fully understand the risks of investing in them. This means understanding that these instruments can be potentially fully written down. There are no additional restrictions on retail investors obtaining diversified exposure to TLAC instruments, for example, through funds. These funds are generally well diversified and professionally managed with ongoing portfolio and risk monitoring. MAS will continue to monitor the situation and make adjustments as and when necessary.

Sir, let me next address concerns that Mr Saktiandi Supaat and Mr Kenneth Tiong raised on cross-border recognition and cooperation as they relate to bail-in. There are regular, well-established communication channels between MAS and our foreign regulatory counterparts to discuss supervisory and crisis management matters for each D-SIB. Should a D-SIB show signs of distress, there will be increased communication and discussions on what actions to take, be it bail-in or otherwise. MAS will coordinate this action with all relevant regulators of the D-SIB.

Mr Kenneth Tiong mentioned that part of these TLAC instruments issued by our D-SIBs will likely be sold abroad and governed by foreign law. Assoc Prof Jamus Lim asked if Additional Tier 1 bonds should still count towards TLAC, given legal uncertainties as evidenced by the Credit Suisse Additional Tier 1 lawsuits.

MAS requires all TLAC contracts to include a clause stating that these instruments remain subject to MAS' bail-in powers, regardless of their governing law. This will address legal uncertainties on whether such instruments can be effectively bailed in. MAS intends to abide by the creditor hierarchy when exercising its bail-in powers during a resolution. All creditors who receive less in a resolution compared to what they would have received in a liquidation will also be entitled to compensation and MAS will make no distinction between local and foreign investors or between foreign investors of different countries.

Mr Kenneth Tiong also raised questions on Singapore's approach towards international standards, disclosure of Government bond holdings by D-SIBs, and suggested proposals on trade corridors and cross-border information sharing during Singapore's ASEAN chairmanship next year. While these are important points, they fall outside the ambit of this Bill. I therefore invite Mr Tiong to file separate Parliamentary Questions if he wishes to explore these topics in greater detail.

In the meantime, I assure him that, as with our approach to TLAC, MAS will continue to participate actively in international fora and implement Basel standards locally, but in a manner that is pragmatic and is suitable and appropriate for Singapore. MAS will also supplement such standards with prudent supervision of credit, liquidity and interest rate risks so our banks remain resilient and at the same time, also remain competitive.

Sir, I now turn to questions related to the second part, which is the amendments to counter proliferation financing raised by Ms Sylvia Lim, Dr Hamid Razak and Mr Saktiandi Supaat.

On queries relating to the definition of "proliferation financing" that Ms Sylvia Lim raised, I would like to clarify that it would cover the financing of proliferation of the means of delivery of weapons of mass destruction under the relevant UNSC Resolutions relating to the Democratic People's Republic of Korea and Iran. There are also existing guidelines that MAS has provided to make this clear to our financial institutions.

There is also no impact on existing practices, as MAS' supervision of financial institutions already covers proliferation financing risks. Financial institutions already also have measures in place to address proliferation financing risks through MAS' guidance and engagements in this area over the years. MAS has also partnered industry bodies like the Association of Banks in Singapore and the Singapore FinTech Association to conduct industry outreach and issue best practice papers to support implementation across financial institutions. MAS also provides financial institutions with practical tips to adopt technology to sharpen risk detection capability.

MAS and the Singapore Police Force's Commercial Affairs Department also regularly engage banks via platforms, such as the Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership to discuss management of money laundering, terrorism financing and proliferation financing risks.

MAS will continue to engage and provide guidance as necessary to the financial institutions to sustain their awareness of proliferation financing risks and effective implementation of robust risk-proportionate controls.

As Mr Saktiandi Supaat observed, technology and information sharing can strengthen the detection of proliferation financing risks. And COSMIC, as he raised it, is a platform for the six participating banks to securely share with one another information on customers that may be engaging in illicit activities including those relating to proliferation financing. Where useful, MAS will synthesise information from COSMIC and share it with the broader industry. We have seen early signs of success with COSMIC, with more suspicious transaction reports filed and over 1,000 suspicious customer accounts closed. We will expand COSMIC to include other participating banks to build on this progress and success.

Sir, Mr Kenneth Tiong and Ms Sylvia Lim also spoke about FATF's recently completed evaluation of Singapore's Anti-Money Laundering and Countering the Financing of Terrorism and countering proliferation financing framework. I would like to share that the intended amendments to the Financial Services and Markets Act before the House today are unrelated to the outcomes of Singapore's FATF evaluation. They have been planned for a while to technically align our approach with earlier changes to the FATF Standards.

While the outcomes of and follow-ups from the FATF evaluation are not subject to today's debate, I would like to emphasise what Senior Minister of State Murali Pillai said in Parliament in July – that Singapore had performed well in that assessment. And that in the areas where FATF has made recommendations to strengthen specific aspects of Singapore's framework, we are carefully studying them and we will develop plans that are also both risk-proportionate and suited to Singapore's context.

As Minister Chee Hong Tat also clarified in the House in July, FATF's specific observations in that context related to overseas representative offices or foreign ship registries operating in Singapore. Minister Chee then also made clear that these entities remain fully bound by Singapore law, including our UN sanctions regulations. The amendments before us complement that whole-of-Government posture and ensure that our financial institutions remain vigilant against trade and maritime financing abuse.

Sir, I will conclude by thanking Members again for their support of the Bill. Their support reflects the desire to ensure Singapore remains a trusted and resilient international financial centre, supplemented by a strong resolution framework. Mr Deputy Speaker, I beg to move.

Mr Deputy Speaker: Ms Sylvia Lim.

4.36 pm

Ms Sylvia Lim: Thank you, Sir. I have one clarification for the Minister of State. I just wanted him to confirm that what he meant in his round-up speech was that there is actually no intention, on the Government's part, to impose on financial institutions proliferation financing-related obligations beyond the UN-sanctioned countries – is that what he was saying? We are going to track closely to what the UN has recommended or the UN resolutions?

Mr Alvin Tan: Sorry, could the Member repeat her question, please?

Ms Sylvia Lim: Sir, just to explain, in my speech, I had mentioned that the definition in clause 2 was quite wide, meaning that the definition of proliferation financing was not explicitly linked to only those that were required by UNSC resolutions. So, I just wanted him to confirm that it is the intention of the Government that the obligations on the financial sector in Singapore track closely to only what the UNSC has required and we are not intending to go beyond that on our own?

Mr Alvin Tan: Sir, Ms Sylvia Lim is correct in that regard. We are not going beyond.

4.37 pm

Mr Deputy Speaker: No further clarifications.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Alvin Tan].

Bill considered in Committee; reported without amendment; read a Third time and passed.