LEGISLATION TO LICENSE AND REGULATE FINANCE COMPANIES

Mr P. Govindaswamy asked the Minister for Finance if he will state the number of finance companies operating in Singapore and if he will consider introducing legislation for the licensing and regulation of the business of finance companies with specific provision to safeguard the interests of persons who deposit money with such companies.

Dr Goh Keng Swee: The term "finance companies" generally applies to companies soliciting and accepting deposits from the public and making loans to the public to buy articles like motor cars, motor scooters, television sets, radios and refrigerators. There is a wide range of finance companies. They range from the larger ones operating usually as subsidiaries of banks to smaller ones which include pawnshops that accept money from the public.

The operations of these finance companies are, in some ways, similar to banks but, unlike banks which are required to be licensed and subject to the provisions of the Banking Ordinance, there is no specific law governing the operations of finance companies. Therefore, it is not possible to determine the exact number of such companies operating here today, as these companies are not compelled by law to report or register or to inform the Government that they are operating as finance companies other than registration under the Companies Ordinance.

My predecessor, who is now the Minister of Defence, has already expressed his concern over the activities of these finance companies in his Budget speech last year. He announced that Government would be introducing legislation to regulate and control such companies. This legislation is being prepared in consultation with International Monetary Fund advisers and we will introduce the Bill in Parliament in the near future - probably at the next sitting.

Mr Govindaswamy: The Minister for Finance will note the statement, "with specific provision to safeguard the interests of persons who deposit money with such companies". Can the Minister say whether the Government will, by legislation, take responsibility to safeguard the money deposited with such companies?

Dr Goh Keng Swee: I think it is best to leave the exact details of safeguards in the legislation when the legislation itself is introduced. But, first, let me say that Government is in no position to guarantee deposits by members of the public either in finance companies or banks or anywhere else. If you give your money to other people and they run away with it, then that is your own bad luck. You cannot go to Government and say, "Pay up." But what we can do is to ensure that finance companies do not fiddle around with other people's monies, that they have a sound investment policy, and that they refrain from certain acts which may endanger the security of their customers' deposits.