FINANCE COMPANIES (Wider role)

Mr Sin Boon Ann asked the Deputy Prime Minister whether he will allow finance companies to assume a wider role if the result of bank mergers limits the access of the small and medium-sized enterprises to financial services.

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, finance companies are already active lenders to small and medium enterprises (SMEs). For the larger finance companies, a significant portion of their total loans are extended to SMEs. MAS has also given well-managed finance companies greater leeway to offer other services which will benefit all their customers, including SMEs. These include the issuing of corporate purchasing cards, and the granting of IPO financing and secured syndicated loans subject to conditions.

Mr Sin Boon Ann (Tampines): Mr Speaker, Sir, will the MAS consider allowing finance companies to assume a wider range of services such as corporate advisory and financial advisory services, something which the banks are undertaking at the moment but which they may not be inclined to extend to small and medium enterprises on account of the lack of economy of scale in respect of these enterprises?

BG Lee Hsien Loong: Mr Speaker, Sir, we have not considered this. We will have to look at it very carefully because advisory services are different from lending. One is commercial banking where you assess credit risk; the other one is advisory service which is merchant banking where you have to judge the market and advise how to restructure a deal in order to bring it to market and find investors who are willing to invest in it. So I think I would be careful about that.

As I have explained in this House previously, I do not believe that the banks will now neglect the SMEs because they have consolidated. The SMEs are an important part of their customer base and they will want to keep them.