Banking (Amendment) Bill

Order for Second Reading read.

3.32 pm

The Minister for Education (Mr Ong Ye Kung): Mr Deputy Speaker, on behalf of the Senior Minister and Minister-in-charge of MAS, I beg to move, "That the Bill be now read a Second time".

Mr Deputy Speaker, in a constantly changing environment, our legislation needs to be reviewed regularly to keep pace with changes. The Monetary Authority of Singapore (MAS) therefore reviews the Banking Act from time to time to ensure that the regulatory framework for banks continues to foster safety and soundness in Singapore's banking system while making sure that requirements are not unduly burdensome.

In this round of amendments, MAS is changing two long-standing regulatory practices which have lost relevance over time.

First, the Bill will remove the requirement for banks to segregate their accounting books into the Domestic Banking Unit (DBU) and the Asian Currency Unit (ACU). This DBU-ACU divide has traditionally been used to distinguish the domestic and offshore operations of banks and merchant banks.

The second change, the Bill will rationalise and consolidate the regulation of merchant banks under the Banking Act and subject them to a licensing regime, under which they will be licensed as a class of financial institutions distinct from banks.

The Bill will also makes other amendments to enhance MAS' regulatory and supervisory powers to tackle new and emerging risks. These include expanding the grounds for revoking bank licences, and introducing new powers for MAS to impose requirements on outsourcing arrangements of banks and merchant banks.

I will now go through the main amendments in the Bill.

First, the removal of DBU-ACU divide. MAS has engaged the industry extensively on the proposed amendments and has taken into consideration their feedback on the implementation timeline.

The divide has existed since 1968. DBU and ACU have their origins in the creation of the Asian Dollar Market in Singapore. Like the Euro market located in London, the Asian Dollar Market served as a major source of funding for investment, trading and risk-management needs for the region and beyond.

The DBU is used to book domestic transactions, which are mostly denominated in Singapore dollar. The ACU is used to book offshore transactions and these are denominated in foreign currency.

MAS' regulatory requirements for banks and merchant banks in turn apply depending on whether the activity was booked in the DBU or the ACU.

Foreign banks that wished to participate in the Asian Dollar Market through their ACU had to meet high standards of admission and have reputable home regulators exercising oversight of their global operations. Those that also engaged in domestic businesses in Singapore through the DBU were then subject to additional prudential requirements from MAS, such as limits on large exposure and equity investment.

The DBU-ACU divide provided a way to safeguard domestic financial stability, without unduly impinging on the growth of offshore banking activities conducted out of Singapore.

It also provided a simple basis for awarding developmental incentives to encourage the growth of offshore banking activities out of Singapore.

While the DBU-ACU divide has served us well for decades, it is no longer relevant and will be removed because of the following reasons:

First, regulatory reforms since the Global Financial Crisis have put all banks around the world on a sounder footing. These developments mean that there is less need to distinguish between banks' offshore and domestic banking activities. All home regulators including Singapore will now require their banks to meet enhanced standards on a group-wide and global basis, which includes their branches and subsidiaries in Singapore. So, for example, new global rules have raised the amount and quality of capital with the introduction of a minimum 4.5% Common Equity Tier 1 capital adequacy ratio requirement, and have introduced minimum standards on the amount of liquidity buffers that banks need to hold. Global regulators have also agreed on a common framework to control large exposures to a single counterparty or a group of connected counterparties, limiting these exposures to 25% of Tier 1 capital.

Second, MAS has also enhanced its regulatory framework over time which has made the divide less meaningful. For example, banks in Singapore are required to meet liquidity requirements based on all-currency and Singapore dollar criteria, rather than DBU or ACU. MAS has also introduced the framework for domestic systemically important banks. Designated banks are subject to additional supervisory measures covering both their domestic and offshore businesses. So, a lot has changed in terms of the regulatory environment.

Globally, you have higher standards now after GFC that covers all banks, offshore as well as onshore. Secondly, within domestic regulation, standards have risen and also blurred the lines between what is DBU and what is traditionally ACU. And the third reason is MAS' developmental incentives have also broadened. In the past, MAS' incentives were focused on the ACU to encourage the growth of offshore banking activities out of Singapore.

Today, MAS assesses the developmental merits of an activity much more broadly, and no longer based on domestic versus offshore distinction. As a result, the DBU-ACU divide is no longer useful, and will impose a compliance burden on banks with little benefits to prudential soundness or systemic stability.

Therefore, the Bill will remove DBU-ACU divide and make corresponding consequential amendments to the relevant provisions in the Banking Act. These include amendments to – (a) rank uninsured non-bank deposits in insolvency by the currency denomination of the deposits, that is, Singapore dollar or a foreign currency, rather than by DBU or ACU; (b) apply asset maintenance ratios on Singapore dollar non-bank deposits, instead of DBU non-bank deposits; and (c) remove the regulatory limits imposed on the Singapore branches of foreign banks for equity investments, immovable property and large exposures. These limits are no longer necessary. MAS will rely on the consolidated supervision by these banks' home supervisors to manage such risks at the bank group level.

The second amendment is the consolidation of merchant banks' regulation into the Banking Act.

Merchant banks are a class of financial institutions approved under the MAS Act. Unlike banks, merchant banks are not allowed to accept deposits or raise funds in Singapore dollar, from the public.

Hence, when merchant banks were first introduced in Singapore in the 1970s, they engaged primarily in capital market services, such as corporate finance and fund management. They were therefore subject to a less stringent approval regime under the MAS Act.

Subsequently, we encouraged merchant banks to participate in the Asian Dollar Market, by allowing them to apply to operate an ACU for their foreign currency activities. They were then subject to certain requirements in the Banking Act.

Merchant banks have since been subject, therefore, to two pieces of legislation, namely, the MAS Act as an approved financial institution and then by the Banking Act by virtue of their ACU activities.

As we remove the DBU-ACU divide, we are taking the opportunity to have the Bill also streamline the regulatory framework for merchant banks by consolidating them under the Banking Act. The Bill will introduce a new Part VIIB in the Banking Act to set out a new licensing framework for merchant banks as a class of financial institutions distinct from banks.

The third amendment, the Bill will also introduce new or revised provisions to strengthen MAS' regulatory oversight of banks and merchant banks. As these rules apply to both banks and merchant banks, I will refer to them collectively as banks in this section. The key highlights are as follows:

First, expand grounds for revocation of bank licence. In line with the international regulatory standards and practice, MAS has the power to revoke bank licences under certain circumstances, such as when a bank – (a) is carrying on its business in a manner likely to be detrimental to the interests of the depositors of the bank; (b) is contravening the provisions of the Banking Act; or (c) in the case of a foreign bank branch in Singapore, has had its licence in its home jurisdiction withdrawn by its parent supervisory authority.

As our banking landscape changes, new risks emerge, and our regulatory framework has to evolve to better manage these risks. As a result, it becomes necessary to expand the grounds for MAS to revoke a bank licence to better protect depositors, enhance MAS' enforcement powers over banks and uphold trust and confidence in our financial system.

So, the three new grounds are as follows.

First, contraventions of provisions of the MAS Act. The MAS Act contains important regulatory requirements such as those relating to anti-money laundering and countering the financing of terrorism, of which non-compliance is regarded as a very severe breach of our regulatory requirements;

Two, in the case of a foreign-owned bank incorporated in Singapore, when the parent bank's licence is withdrawn by the parent supervisory authority. This is in recognition that foreign banks are increasingly operating in Singapore through subsidiaries instead of just branches. It mirrors the current power MAS has over foreign bank branches today.

Three, when MAS regards that it is in the public interest to do so. This is a ground that is currently available for revocation for most other financial institutions regulated by MAS, but not for banks. This additional ground is also in line with practices in other international jurisdictions such as Australia and Hong Kong.

Next, the Bill enhances MAS’ oversight of certain services such as outsourcing services obtained by banks.

When banks enter into outsourcing arrangements, MAS expects the bank to maintain the same risk management standards as if the services were performed by the bank itself. This includes similar standards and practices in ensuring customer information is safeguarded.

The Bill will enhance MAS' oversight over outsourcing arrangements by introducing a new section 47A in the Banking Act. The new section will empower MAS to impose on such arrangements, risk-proportionate, legally binding requirements, such as requiring a bank to include in its agreements with the service providers: the right of MAS to audit the service provider; the obligations of the service providers to protect the customer information against unauthorised disclosure, retention or use; and the bank’s right to terminate the arrangement under specified circumstances.

MAS has considered the practices in other leading jurisdictions in setting out these requirements.

These powers are practised in Australia and the EU. They are timely in light of the increased prevalence and complexity of banks' outsourcing arrangements today.

The Bill will provide for the powers and MAS will be consulting on the detailed regulations in due course.

Finally, the Bill will also introduce several other amendments to support MAS’ regulation and supervision of banks. These are:

First, in line with global regulatory standards, some of the key prudential requirements imposed by MAS include requiring banks to have a stable and sustainable funding structure for their activities and to address risks arising from related party transactions. These requirements are currently issued under a general provision in the Banking Act, unlike other important requirements, such as minimum capital requirements which are issued under specific Banking Act provisions. The Bill will formalise MAS' current powers and raise the signature of these two requirements.

Second, banks in Singapore are permitted to disclose customer information only in certain specified circumstances, such as when the customer has provided written consent, pursuant to Court orders, or to the bank's external auditor.

Banks are audited by external auditors but external auditors are, in turn, assessed by ACRA, which evaluates the quality of the audits performed by the auditors. So, ACRA is the auditor of the auditor. So, we are amending the Third Schedule of the Banking Act to allow ACRA access to complete bank audit working papers, which includes customer information, and that would enable ACRA to review the auditors more effectively. For example, ACRA can evaluate if the external auditor has assessed the credit quality of customers and the adequacy of provisions appropriately, against market information. This amendment will help raise the quality of bank audits and support MAS' supervision of banks. ACRA officers with access to the information will be subject to confidentiality requirements.

Sir, this Bill will rationalise and streamline the regulatory frameworks for banks and merchant banks, and strengthen MAS' regulation and supervisory oversight of both classes of financial institutions. Mr Deputy Speaker, Sir, I beg to move.

Question proposed.

3.47 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, I stand in support of the Bill. The amendments, which update the Banking Act, have been through two rounds of public consultation. The MAS has also published a detailed response to the feedback received on the proposed amendments. I commend the transparency and rigour of MAS' consultation process. I am heartened that, increasingly, we not just see public consultations on Bills but also detailed responses on the feedback we received.

Sir, I would like to seek some clarifications on the Bill and also offer some suggestions.

The amended section 20(1) will expand the grounds for revocation of bank licences, allowing MAS to revoke a bank licence if it "is satisfied that it is in the public interest to do so" under section 20(1)(d).

In response to a question on when MAS would consider it to be in the public interest to revoke a bank licence, MAS responded that it will consider the factors set out in the MAS' Enforcement Monograph. This includes whether there was ineffective governance, widespread control failures, pervasive non-compliance, gross misconduct, or serious breaches of applicable law.

The Enforcement Monograph is a guidance document that is not strictly legally binding. Revoking a bank licence is a very drastic step and, yet, the considerations stated in the Enforcement Monograph are not legally binding. Why?

Can the Minister also confirm it will only revoke bank licences on the ground of "public interest" for the most serious cases of ineffective governance, widespread control failures, pervasive non-compliance, gross misconduct, or serious breaches of applicable law, as stated in the Enforcement Monograph?

Next, under the new section 57FD, key appointment holders and 20% controllers of credit card or charge card licensees are to be approved as "fit and proper" by MAS before being officially appointed. The definition of "fit and proper" is set out in MAS' Guidelines on Fit and Proper Criteria.

Can the Minister clarify why, compared to section 15B where key appointment holders, 20% controllers, 12% controllers and indirect controllers of designated financial institutions have to be approved by MAS but under the new section 57FD, only key appointment holders and 20% controllers of credit card or charge card licensees have to be approved by MAS?

Can the Minister also share how actively the "fit and proper" requirement is enforced? Have there been individuals that have been denied appointment or removed from their roles for not meeting the "fit and proper" requirement?

Lastly, the new section 27(2) sets out a list of related parties that are subject to MAS' requirements on related-party transactions. This includes at section 27(2)(e) "any person in a senior management group of the bank".

MAS has also stated that "senior management group" will include "family members of the executive officers". In response to a question on the definition of an "executive officer", MAS replied that the definition of an "executive officer" is not meant to be descriptive. Instead, MAS expects banks to assess and identify their executive officers. It also stated that it is good practice for the bank to document how it determines the list of "executive officer(s)".

MAS is seeking to increase its oversight of banks; yet, the strengthened regulations could very easily be circumvented by the banks' own definition of "executive officer". It seems strange that we have gone to the effort of strengthening our regulations only to leave the final necessary step in the hands of the banks.

Will MAS consider requiring in subsidiary legislation that banks document how they determine the list of "executive officer(s)" given that it is currently already recommended that banks do so but only as good practice? This would be preferable to leaving it open-ended and subjected to interpretation.

Sir, notwithstanding these clarifications and suggestions, I stand in support of the Bill.

3.51 pm

Ms Anthea Ong (Nominated Member): Mr Deputy Speaker, I stand in support of this Bill that seeks to remove the two-tiered banking system that has been in place since 1968. It also seeks to consolidate the licensing and regulation of merchant banks under the Banking Act, in an effort to update and strengthen our regulatory framework in light of international and industry developments.

Yet, there is one significant and glaring development that we must talk about in updating the Banking Act. As we speak, ongoing wildfires in Australia have burnt through five million hectares of land costing A$240 million in claims so far. Severe floods have ravaged much of Jakarta last week. With the growing prevalence of the climate-induced events in the world and specifically to our region, there is an urgent need to safeguard financial assets, yet be innovative in legislative interventions to reduce future risks to Singapore's banking industry.

Do not take my word for it, Mr Deputy Speaker. The Network for Greening our Financial System (NGFS) formed by a group of central bankers and supervisors worldwide, noted that climate risks, I quote, "could be larger, more widespread and diverse" than any other structural change. Given that it will come from all sectors and geographies, it is clear our financial system is exposed. Regulatory frameworks around climate-related risk management will allow for a systematic adoption of practices for the accelerated transition towards a sustainable banking sector. As a founding member of the NGFS, MAS must lead and contribute in this area.

In his speech on "Green Finance for a Sustainable World" last November, Minister Ong highlighted three key areas to build a financial industry resilient to climate change risks, namely: measuring, mitigating and disclosing these risks. I agree broadly with the identified areas but the devil, as we know, is in the details.

First, measuring risks. We know that bookkeeping carbon emissions produced by assets on a bank' balance sheet is always a challenge. However, here in Singapore, existing avenues, such as the Carbon Pricing Act, already allows banks to obtain carbon emissions-related data and estimate their borrower's exposure to carbon regulation and transition risks. Facilities with higher than 2,000 tCO2 emissions report their emissions to NEA. Such data should be used for carbon risk assessment and be mandated for reporting by SGX-listed companies. Jurisdictions like Hong Kong already require this. We should institute this so that our banks have clear and comparable data to measure the risk exposure of their public-listed clients.

As a former corporate banker myself, I would even push for data collection beyond just carbon emissions data. Our bankers must also obtain information from borrowers to understand where business value could be at risk. The 2011 floods in Thailand are a critical example of how risks could be embedded in the supply chain and may not be obvious through a carbon data metric. Operating loss from the floods incurred by Toyota and Honda increased by 37% and 55% respectively in 2011.

Metric selection is also critical. Climate change risk has a long-tail and is widespread. Credit risk metrics have historically been insufficient in addressing tail-end risks. Metrics that simply average potential risk across multiple years underestimate potential impact. Solely focusing on high-carbon assets is a good first step but still insufficient. Stress testing portfolio risk is also an important part of risk management. Stress test scenarios should be centrally-developed, not individually designed, to ensure that there is alignment to the Paris Agreement target and geographically-relevant worst-case scenarios.

Second, mitigating risks. We must applaud Singapore banks for moving quickly in announcing policies to cease financing new coal power plants. Two out of three banks will not be increasing their exposure to the transition risks of this industry. As more large banks and insurers decide to divest from coal power development, banks that continue to consider such projects are exposed to increasing risks that will be harder to mitigate.

While The Association of Banks in Singapore (ABS) has Responsible Banking Guidelines and a haze toolkit, these are voluntary standards. Bangladesh already has a mandatory environmental risk management guideline for Bangladeshi banks. In terms of international alignment, we note that only one Singapore bank is a signatory to the Equator Principles and none has signed the UN Principles of Responsible Banking. Mandatory standards in Singapore and international alignment are key signposts that our banking industry is robustly equipped to mitigate environmental, social and governance risks, particularly around climate change.

Lastly, disclosing climate risks. As this Bill considers the publication requirements of banks under clause 12, we should also consider the disclosure of climate risks. The Governor of the Bank of England said that "to bring climate risks and resilience into the heart of financial decision making, climate disclosure must become comprehensive". Investors are demanding more. Commonwealth Bank of Australia was sued for misleading investors by failing to disclose climate-related risks in its 2016 annual report .

According to WWF Singapore's recent review of ASEAN Sustainable Banking Regulations, only Malaysia has firmly expected banks to assess, mitigate and publicly disclose their portfolio-level exposure to material environmental and social (E&S) risks, including climate risk and information on transactions assessed/escalated/approved with conditions. Singapore should be requiring our banks to do the same. Accounting for climate risks is hard work, but there are existing networks like the Pilot Project by UN Environment Programme Finance Institute (UNEP-FI) on Implementing Recommendations by the Taskforce for Climate Financial Disclosures (TCFD) as well as the Partnership for Carbon Accounting Financials (PCAF) that can support our banks in this process.

Mr Deputy Speaker, given the above, I would like to seek the Minister's clarifications on the following.

Will we consider a timeline for mandatory TCFD disclosures for financial industries as well as listed companies, since voluntary regimes are typically not useful in generating comparable and usable industry-wide information? Is the Minister looking at a supervisory engagement roadmap on climate change? Will MAS support the banking industry with centrally-developed stress test scenarios that incorporate the views of experts and civil society? Will the Minister consider leading an ASEAN taskforce that embarks on a bottom-up modelling of business risks from climate change across our region, including the supply chain impacts across borders?

Mr Deputy Speaker, the UNEP and DBS released a report called "Green Finance Opportunities in ASEAN" in 2017. Green investments needed in the ASEAN region amounted to US$3 trillion between 2016 and 2030. Beyond this being a business opportunity, accelerating the growth of green finance reduces instability to our financial system in the future. As NGFS has noted, "the impacts of climate change could be irreversible, if not mitigated."’

According to their 2018 Sustainability Report, DBS provided S$2.4 billion of sustainable funding. While our banks have been highly positive on the green finance opportunities, there is still much we can do.

A number of countries have established national green banks to provide initial funding to develop clean energy, transport, energy-efficient markets. The Green Bank Network, based out of Washington DC, currently consists of 15 national, state or city level member banks that aim to catalyse green financing. This includes the Clean Energy Finance Corporation (CEFC) of Australia. The UK government seeded the UK Green Investment Bank in 2012 that continues to deploy green capital successfully.

Mr Deputy Speaker, as we debate today on improving and strengthening our banking industry with this Bill, I would like to seek the Minister's clarification on our plans for national green banks and green financing, including the standards for green loans, much like we have in ASEAN Green Bond Standards which recommends disclosure and external review of impact.

The financial industry has been all abuzz with the opening of five digital bank licences by MAS. In our licensing considerations for these digital banks, we have made provisions to enable new players that have regional reach and diverse customer bases. We must, therefore, incentivise and harness the innovative essence of these new digital partnerships not only to encourage the collection and use of new data but also to create new sustainable financing solutions.

For example, ING Real Estate Finance and a partner launched ING REF Sustainable App in 2016. Within two years, it helped identify €35 million of potential energy cost savings within its real estate portfolio. Can the Minister please clarify if sustainable finance will be a key component of our digital bank roadmap for Singapore?

Prime Minister Lee noted in his recent New Year message that "A Singapore turned inward cannot survive". Indeed, we are and always will be an open economy. Financial services directly contribute a significant 13% to our GDP in 2018 or S$64 billion. Its indirect contribution fuelling the rest of the economy is clearly way more.

Mr Deputy Speaker, the eminent economist Prof Hyman Minsky, famous for predicting the subprime crisis and the "Minsky Moment", noted that financial crises are caused by hidden risks building up on balance sheets. Given what we now know of climate change and its impact from science and data, we absolutely cannot let such risks build up with little or no visibility.

Large institutional investors like Aviva Investors share the same view. Its Chief Investment Officer said recently, quote "understanding climate risk isn’t an exercise in trying to save species and habitats – this is also about protecting people's retirement income and their investments."

Smart regulation has allowed MAS to be nimble and adaptable as a world-class regulator and central bank. MAS is also known for its "regulatory sandbox" approach, or sometimes described as "regulation running alongside innovation". I am aware MAS is planning a public consultation exercise in 2020 – earlier than later, I hope – to inform the upcoming, finally, guidelines for Environmental Risk Assessment.

We must act with the fierce urgency of now. I look forward to the Minister's clarifications on what I have outlined above and his assurance that MAS' regulatory roadmap is running alongside, if not ahead of, this climate crisis so as to build a climate-change resilient, robust and responsible financial industry for Singapore.

4.03 pm

Mr Ong Ye Kung: Mr Deputy Speaker, on behalf of the Senior Minister and Minister-in-charge of MAS, let me now address the questions of the Members.

Mr Louis Ng asked why the considerations for revoking a bank licence on the ground of public interest are not set out in legislation, given that revocation is a drastic step. Mr Ng also sought confirmation that MAS would only revoke bank licences on the ground of public interest for the most serious of cases.

Revoking a bank licence is, indeed, a very drastic measure. MAS is very cognisant that it is the most severe regulatory action that it can take with respect to a bank. MAS, therefore, has a strong and inherent incentive to use this power judiciously, as a licence revocation means the bank will have to stop business, affecting its customers as well as other stakeholders, such as shareholders and employees. If it is not done right, or not based on strong grounds, it will affect our credibility and reputation as a global financial centre.

Therefore, as far as possible, MAS has set out specific grounds on which it may revoke a bank licence in the Banking Act. These include situations where a bank has contravened the Banking Act or is carrying on its business in a manner likely to be detrimental to its depositors' interest.

In all cases, MAS will consider the circumstances for licence revocations set out in the Enforcement Monograph, which provides guidance to the industry on the underlying principles guiding MAS' use of enforcement actions.

That said, as the banking sector will continue to evolve, it is not possible to anticipate all circumstances under which MAS may revoke a bank licence. The ground of public interest thus provides MAS with the option to take timely action in unanticipated circumstances to protect the public interest.

Let me cite an example. In 2016, MAS withdrew the merchant bank status of BSI Bank and Falcon Bank – both were merchant banks – because both banks had committed serious breaches of MAS' anti-money laundering requirements and there was gross misconduct by their management and staff.

MAS also considered at that time the wider public interest in closing these banks in order to safeguard Singapore's reputation as a clean and trusted financial centre and to send a strong deterrent message that such breaches and misconduct will not be tolerated. Those powers were provided under the MAS Act in relation to merchant banks. This latest amendment to the Banking Act will extend the use of the public interest ground to the revocation of bank licences.

I have mentioned earlier that the public interest ground is in line with practices in other jurisdictions, such as Australia and Hong Kong. This ground is also not unique to banks, as MAS already has the same revocation power on public interest grounds for other classes of financial institutions it currently supervises. Mr Ng can be assured that the proposed public interest ground for bank licence revocations will be reserved for the most serious of cases.

The next set of questions relates to the powers for MAS to approve 20% controllers and key appointment holders, and to remove key appointment holders, of credit card or charge card licensees. Mr Louis Ng asked why the approval requirements for credit card or charge card licensees differ from that of banks.

MAS calibrates its licensing and regulatory requirements to be commensurate with the risks posed by financial institutions. Credit and charge card licensees conduct limited business activities, while banks conduct a wider range of activities, such as deposit-taking and lending, in addition to credit and charge card issuance. Hence, the thresholds for MAS to approve controllers and key appointment holders are tiered accordingly.

Mr Ng also requested more information on the enforcement of the "fit and proper" requirement by MAS. The requirement is an essential component of MAS' regulatory framework. Applicants must declare their fitness and propriety when they apply for MAS' approval. MAS conducts checks on these individuals before approval and may take action to remove such individuals where necessary. So, it is actually actively being implemented.

Mr Louis Ng also asked whether MAS would consider prescribing a list of executive officers in subsidiary legislation to prevent banks from circumventing MAS' requirements on related party transactions. As Mr Ng has rightly pointed out, an executive officer of a bank in Singapore and his or her family members would be considered as related parties of the bank. "Executive officer", in relation to a bank, is already defined in section 2 of the Banking Act. This qualitative definition is familiar to the industry. The term is also used in other sections of the Banking Act as well as other MAS-administered legislation.

This approach is preferred to a listing of job titles or designations as it is able to better capture persons holding managerial roles and responsibilities and is less likely to be affected by differences in nomenclature among banks or changes in specific designations over time. In fact, if we are too definitive in spelling out all the designations, our worry is, it makes it even easier to circumvent. It is much better that the industry, which already understand the definition, live by the definition and the spirit of the definition. MAS assesses that the risk of circumvention now, based on the banking industry's understanding of the definition, is low, given the common understanding of the scope of an executive officer.

Lastly, Ms Anthea Ong raised a few points on building a sustainable and resilient financial system, such as developing standards for green finance and leveraging technology and innovation to enhance sustainable finance efforts.

These issues are actually not within the scope of this Bill. I will, nevertheless, respond briefly to them in this session. I will be happy to address them in greater detail on other suitable occasions, such through a Parliamentary Question or the upcoming Committee of Supply debate.

MAS announced its green finance action plan in November 2019, at a FinTech festival with big international audience. Singapore's financial sector can play a decisive role in promoting sustainable development opportunities and powering this transition, especially in Asia. Finance, innovation and technology together can be a force for good, to overcome challenges and address climate change. To be a leading centre for Green Finance in Asia and globally, MAS is taking steps that are very in line with what Ms Anthea Ong has spoken about, namely: first, build financial system resilience to environmental risk; and second, develop green finance solutions and markets.

To answer Ms Ong's question, we are not looking to specifically set up national green banks which are probably not necessary. But green financing has the potential to be a mainstream activity of all traditional banks; and

Third, leverage innovation and technology.

For a start, MAS will be issuing environmental risk management guidelines to set out its supervisory expectations on governance, risk management and disclosure across the banking, insurance and asset management sectors. The consultation paper, as alluded by Ms Anthea Ong, will be published in the first quarter of 2020. So, yes, we are embarking on an engagement process with the industry and the public starting with this consultation paper in the first quarter of this year.

MAS is also working to anchor green expertise in Singapore, such as Environment, Social and Governance (ESG) researchers and investment analysts from asset managers, through mandates under the Green Investment Programme, as well as professional service providers that conduct ESG rating, assurance and certification of green financing solutions, through various grants. MAS will promote the adoption of green financing solutions, such as green bonds and loans, through all these measures.

In assessing the digital bank applications, MAS will be looking at how they can contribute to sustainable financing, which is a key growth strategy for Singapore's financial sector. Looking at the potential tenderers, I am sure many of them will also be eager to portray and present their green credentials to MAS.

These initiatives will support the mobilisation of resources to activities that promote sustainable development in Asia and globally.

Mr Deputy Speaker, let me conclude by reiterating the purpose of this Bill, which is to rationalise and streamline the regulatory frameworks for banks and merchant banks, and strengthen MAS' regulatory and supervisory oversight of both classes of financial institutions.

With that, Mr Deputy Speaker, I beg to move.

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 Ong Ye Kung].

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