Proposal to Centralise All Financial Institutions, Moneylenders and Credit-providing Companies under Single Regulatory Framework
Prime Minister's OfficeSpeakers
Summary
This question concerns Member of Parliament Desmond Choo’s inquiry on centralising all financial institutions and credit providers under one regulatory framework to enhance financial system robustness and consumer protection. Senior Minister Tharman Shanmugaratnam responded that government agencies already coordinate oversight, with 95% of household credit regulated by MAS and the remainder by MinLaw, MTI, and MCCY. He explained that safeguards like loan-to-value ratios and unsecured borrowing caps are largely consistent across different lenders to encourage financial prudence and informed choices. Specific variations, such as interest rate caps for licensed moneylenders, are tailored to address the unique protection needs of specific borrower segments rather than requiring total centralisation. Government agencies will continue monitoring developments to ensure the overall regulatory framework remains coherent and continues to enable informed consumer choices.
Transcript
51 Mr Desmond Choo asked the Prime Minister whether MAS will consider centralising all financial institutions, moneylenders and credit-providing companies under a single regulatory framework to level up the robustness of the financial system and protection to consumers.
Mr Tharman Shanmugaratnam (for the Prime Minister): Our Government agencies work together to oversee the provision of consumer credit in Singapore. About 95% of credit granted to Singapore households by commercial entities is by financial institutions (FIs) regulated by MAS. The remaining 5% includes credit granted by licensed moneylenders regulated by the MinLaw; hire-purchase agreements regulated by MTI; and credit co-operatives overseen by MCCY.
We have over time streamlined the consumer safeguards implemented by these Government agencies, so they are largely consistent. They are guided by the shared objectives of encouraging financial prudence amongst consumers and enabling them to make informed choices on credit. For example, a single set of rules on loan tenures and loan-to-value ratios applies for motor vehicle loans, regardless of whether these are granted by FIs, hire-purchase companies or licensed moneylenders. For housing loans, which are mostly provided by FIs, MAS’ rules require all FIs to take into account borrowers’ total outstanding debt obligations, including housing loans from the HDB, motor vehicle loans under hire-purchase arrangements, and loans extended by licensed moneylenders. Likewise, for unsecured loans, caps are applied to the maximum amount of unsecured borrowings that an individual can obtain from an FI, a licensed moneylender or a credit co-operative. All lenders are also subject to fair dealing requirements such as disclosing key terms and conditions of the credit facility, including interest and late repayment charges.
Where there are some differences in specific requirements, these are intended to address the unique consumer protection needs of borrowers served by each channel of credit. For instance, licensed moneylenders, which typically provide unsecured credit to borrowers with weaker financial standing, are subject to additional safeguards of interest rate and fee caps. FIs regulated by MAS are not subject to these caps but may only provide unsecured credit to individuals with a minimum annual income of $20,000.
Our Government agencies will together continue to monitor developments in consumer credit and ensure consistency and coherence in our overall regulatory framework.