MONETARY AUTHORITY OF SINGAPORE (AMENDMENT) BILL

Order for Second Reading read.

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Last year, the Government embarked on a fundamental review of its policies towards the financial sector, with a view to developing Singapore as a major financial centre in Asia, and globally. The review included re-examining the role of the Monetary Authority of Singapore (MAS) and that of its Board of Directors.

Financial Sector Promotion

Hitherto, MAS has focused on promoting monetary stability for sustainable economic growth, regulating the financial sector to ensure its soundness, and acting as the Government's financial agent. It has also played a developmental role with regard to the financial sector. Under MAS' stewardship, Singapore's financial sector has seen dramatic growth over the last 25 years.

However, we cannot simply extrapolate this success into the future. The global financial industry is in ferment. Falling regulatory barriers, advances in information technology and a tidal wave of mergers are integrating financial markets. Financial activities are consolidating in fewer centres, and competition is intense.

To thrive and grow in this bracing environment, we need a change in approach. MAS needs to build up a much stronger promotion capability. To this end, MAS has formed a separate Financial Sector Promotion Department to focus its efforts in developing the financial industry. Besides attracting new activities, players and products, this department will carry out manpower and IT planning for the financial sector as well as design and implement incentive schemes.

The Bill proposes to include financial sector promotion as one of MAS' principal objects. This is to recognise the importance of this function, and signal to the industry MAS' commitment to a proactive role in promoting Singapore's financial services sector.

Size of the MAS Board

The MAS Act currently limits the size of the MAS Board to seven directors. At the moment, there are six directors serving on the Board, and one more will be appointed on 1st July, in a few days' time. It would be useful to have the flexibility to appoint a slightly larger Board, in order to benefit from the experience of a wider group of individuals. This would strengthen MAS as an organisation and support its efforts to promote Singapore as a world-class financial centre.

The Bill proposes to raise the maximum number of directors from seven to 10. In line with this enlargement, the Bill also recommends redefining the quorum for Board meetings so that the quorum would at least constitute a simple majority of the number of directors serving on the Board.

Criteria for MAS Board Members

Since its founding in 1971, MAS has assumed oversight of various segments of the financial services industry, including insurance in 1977 and securities in 1984. In addition, new activities such as financial futures trading have been introduced, which now come under MAS' purview.

The MAS Act currently disqualifies directors and salaried officials of banks from serving on the MAS Board. However, it does not disqualify those involved in the other activities supervised by MAS from serving on the Board. The Bill proposes to rectify this omission and extend the disqualification to directors and salaried officials of all financial institutions licensed or approved by MAS.

Sir, I beg to move.

Question proposed.

Mr Shriniwas Rai (Nominated Member): Thank you, Mr Speaker, Sir, for giving me this opportunity. Sir, I support the Bill.

The principal aim of the MAS has been and will always be to act as a central bank of Singapore, as well as the financial agent of the Government. And it is to the credit of this body that we have sound fiscal policies, sound monetary management and Members would welcome, as the Deputy Prime Minister has pointed out, to include one more mission statement, which is to foster a sound and progressive financial services sector.

Sir, there are two areas which I would like to raise. When the first Bill was read a Second time in this House in September 1970, the then Finance Minister said that the issue of currency notes would be left to the Currency Board. I wonder whether the Government is going to change this and bring the issue of currency notes within the purview of the MAS in the near future.

The other concern that I have is this. I support the Government's move to increase the membership of the Board of Directors, but I am a little worried on one count. There is now a new requirement of a minimum of four members. I think four is too few. I think we should be a bit more flexible. We should have a minimum of six to a maximum of nine, and I would urge the Deputy Prime Minister to consider appointing Board members from the private sector. It is very important to have private sector inputs in our financial management.

Sir, I applaud the Government's move to appoint Mr J. Y. Pillay from 1st July. I think he would, with his experience, contribute immensely to the MAS. And as I have said earlier, I hope the Government will consider appointing people from outside.

The other point which I am concerned with is this. There is no definition of "financial institution" in the Bill. I know it will take into consideration financial managers. Would it include insurance brokers, moneylenders, pawnbrokers, because it is a very wide definition? I think it would be wise if the DPM could state to the House what are the institutions that will be covered. In any case, I applaud the DPM because it shows that we are very transparent and we do not want people who are involved in this sector to sit in judgment as a Board member.

Sir, our financial sector has grown considerably. Our foreign exchange dealings per day are in the tune of US$190 billion. The fund management is also on the increase and the Bill before the House is timely, especially in view of the fact that the recommendations have been made by a Committee.

With that, Sir, and with the questions that I have raised earlier, I support the Bill.

BG Lee Hsien Loong: Mr Speaker, if I may respond to the points. First, on the issue of currency notes. No, the Government has no plans to transfer this responsibility from the Board of Commissioners of Currency to MAS. The MAS remains technically not quite a central bank, because it does not issue currency and we have a currency board system which has served us well. I think there is no reason to change it.

On Board Members, the Member has suggested that we should look for some more members from the private sector. I agree with him. It was precisely with this in mind that I am proposing to increase the size of the Board. The difficulty, of course, is finding the right persons to serve on the Board, but we are actively looking.

Thirdly, on definition of "financial institutions", I believe there is no definition in the Bill, but basically these are the institutions which are regulated and supervised by MAS. So if we supervise the insurance industry or the stockbroking industry, executives in those companies which come under our jurisdiction will be excluded from sitting. I think it is not quite straightforward to pin down exactly where the boundaries of financial services are. The field is growing very rapidly. Things like futures exchanges, for example, did not exist when we last amended the Act, and we have had to include them. So I think we just leave it as financial institutions and it will be clear which are the ones which come under MAS' purview.

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. [BG Lee Hsien Loong].

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