Navigating the banking licence process in Singapore

09.04.2024

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Singapore emerges as a pivotal player in the global economic landscape, solidifying its status as a premier financial centre and a focal point for the banking and economic sectors in the region. Positioned strategically in the heart of Asia, Singapore's equilibrium in politics, innovative economic strategies, and liberal regulatory framework create an optimal environment for the advancement and growth of the banking industry. These factors, coupled with extensive connections to international financial markets, render Singapore an appealing destination for global banks and economic entities seeking to fortify their foothold in Asia.

However, capitalizing on the myriad opportunities presented by this region necessitates banks and financial institutions to secure a banking licence in Singapore. This accreditation process is rigorously overseen by the MAS, guaranteeing the utmost standards of security, transparency, and sustainability within the banking sector. Obtaining approval not only attests to the financial institution's adherence to local and global standards and regulations but also unlocks access to a diverse array of banking and financial services, facilitating the local-level expansion and advancement of enterprises.

In this exposition, we shall delve into the pivotal facets of banking regulation and the intricacies of the banking licence procedure in Singapore. We shall meticulously navigate through the various types of bank accreditations, the prerequisites for attainment, application methodologies, and the qualifications for applicants.

Examination of Singapore's position as a central hub of the global financial system

According to the 2022 Global Financial Centres Index, Singapore exhibits exceptional performance among the world's foremost financial hubs, enticing global banks, investment funds, insurance entities, and other economic stakeholders. This triumph is attributed to a confluence of critical factors, encompassing political stability, economic openness, an avant-garde regulatory milieu, and well-developed infrastructure.

The WB’21 report underscores Singapore's leadership in the Ease of Doing Business Index, indicative of the nation's robust regulatory framework and business protocols. With one of the globe's lowest corporate tax rates, fixed at 17%, Singapore plays a pivotal role in attracting foreign investments.

Singapore's financial sector commands assets amounting to approximately US$2 trillion, encompassing a broad spectrum of banking and economic services, ranging from corporate finance and investment management to insurance and personal banking. This asset valuation underscores the depth and breadth of Singapore's financial market, as well as its pivotal role in funding local and regional development initiatives in trade and infrastructure. Furthermore, Singapore is a distinguished hub for currency transactions in Asia, bolstering its stature as a global financial nexus.

Moreover, Singapore is acknowledged as an international epicentre for resolving financial disputes, further solidifying its reputation as a dependable and equitable financial hub. The nation offers cutting-edge arbitration and mediation services, ensuring the efficacious resolution of international commercial disputes.

Banking regulation

The MAS serves as the central financial regulatory authority of the government, amalgamating the roles of the central bank and the overseer of all forms of financial institutions within Singapore's jurisdiction. Committed to fostering price stability, sustainable economic growth, and preserving the competitiveness and integrity of Singapore's financial sector on both local and international fronts, MAS undertakes a plethora of pivotal functions.

MAS is entrusted with formulating and executing monetary legislation, overseeing national and international reserves, and ensuring the efficient and stable functioning of the financial system. Key facets of its remit encompass licensing banking activities in Singapore. This includes:

Regulatory oversight of foreign exchange policies, currency issuance, payment system control, and serving as the banking and economic agent of the authorities.
Upholding comprehensive supervision of financial services and safeguarding the stability of the economic framework.
Management of Singapore's official foreign reserves.
Sustaining Singapore's trajectory as a global economic nucleus.

Through strategic global alliances, MAS actively contributes to the initiatives of international economic institutions, facilitating the exchange of expertise and the development of global economic standards, thereby fortifying the resilience of the global economy.

Key legislations

Several laws and regulations play a pivotal role in shaping the regulatory framework of Singapore's financial sector, providing the blueprint for the operation and oversight of banks and other financial institutions.

Banking Act: This legislation forms the cornerstone of Singapore's banking system regulation, delineating licensing prerequisites, operational guidelines, and regulations pertaining to capital adequacy, liquidity, and risk management. Its objective is to ensure the stability and reliability of the banking sector.

MAS Act: This statute delineates the rights and obligations of MAS as the principal banking authority and supervisor of financial institutions. It encompasses provisions related to foreign exchange management, insurance, securities transactions, and a wide array of financial services regulations within Singapore.

In addition to these statutes, MAS collaborates closely with international regulators and engages with global financial institutions to align Singapore's regulations with international standards. This entails the adoption of best practices and standards promulgated by esteemed bodies such as the Basel Committee on Banking Supervision and the IOSCO, among others.

Furthermore, AML regulations and Payment System Directives are instrumental in combating money laundering and the financing of terrorism. They lay down criteria and methodologies for thwarting illicit financial activities and ensuring the reliability and efficiency of payment mechanisms.

Understanding the spectrum of bank licensing in Singapore

Singapore employs a nuanced ranking system for financial institutions, delineating them based on their functional attributes and the scope of financial services they proffer. Spearheaded by the MAS, this classification encompasses universal banks, wholesale banks, investment banks, and credit institutions. Each category of licensing entails specific conditions and regulations governing banking operations within Singapore's jurisdiction.

Type of bank	Description
Full	Endowed with the broadest spectrum of authorized transactions, full banks are empowered to deliver a comprehensive suite of banking services. Both domestic and foreign banks, duly authorized by MAS, partake in this category.
Wholesale	Wholesale banks are permitted to engage in most banking activities, primarily catering to corporate clientele. They are restricted from accepting SGD deposits from the public below a stipulated threshold, usually SGD 250K. Active participants in cross-border and foreign exchange transactions, wholesale banks facilitate corporate financial dealings.
Merchant	Operating under MAS oversight, merchant banks specialize in corporate finance, securities underwriting, asset management, and advisory services tailored for corporate entities. Unlike full and wholesale banks, merchant banks may lack authorization to accept deposits or provide checking facilities.
Finance Companies	Finance companies extend consumer and commercial loans and facilitate diverse purchase financing endeavours. Subject to specific limitations, they are precluded from offering current accounts or payment services. Finance companies play a crucial role in servicing SMEs by furnishing an alternative financing avenue to conventional bank loans.

Admission criteria for securing a Singapore banking licence

Acquiring authorization to operate within Singapore mandates compliance with stringent conditions stipulated by MAS. These conditions are meticulously crafted to underpin stability, confidence, and transparency within the nation's banking framework. Let us delve into the salient prerequisites:

Financial stability, operational history, global standing, and reputation

Prospective applicants must showcase robust financial standing and a track record of success within the financial sector. MAS scrutinizes indicators such as total capitalization, profitability, and risk management strategies as pivotal determinants.

Capitalization requirements

Digital full bank (DFB): Commencing operations as a limited DFB necessitates a minimum authorized capital of S$15 million. Subsequently evolving into a fully operational, DFB mandates the capacity to augment share capital to S$1.5 billion. During the initial operational phase, the DFB may initiate with a maximum aggregate deposit volume of S$50 million, progressively escalating over time. Upon achieving full operational status, DFBs must comply with capital requisites akin to domestic systemically important banks (D-SIBs), encompassing various capital adequacy benchmarks.

Digital wholesale bank (DWB): DWB licensing mandates a minimum initial capital of S$100 million. DWBs are further obligated to meet rigorous risk management and liquidity criteria akin to incumbent wholesale banks, in adherence to MAS 637 and MAS 649 provisions governing capitalization and liquidity.

These stringent criteria underscore MAS's unwavering commitment to fortifying the financial robustness and integrity of new digital banks, necessitating adequate capitalization both at inception and throughout their evolution.

Global standing and regulatory endorsement

Thorough assessment extends to the global ranking and reputation of the applicant financial institution, its parent entity, and principal shareholders, providing a holistic perspective.

Regulatory clearance in the country of origin

The applicant institution must adhere to robust regulatory oversight in its country of origin, signifying the supervisory authority's readiness and capability to collaborate with MAS on information exchange and cross-border risk management. Regulatory robustness in the home jurisdiction ensures alignment with international standards and practices.

Written concurrence from the home regulatory authority

Explicit consent from the supervisory body of the applicant's home country is mandatory, affirming the organization's reliability and compliance with regulatory norms.

Strategic vision and business plans

Applicants must furnish MAS with comprehensive strategies and business plans delineating their provision of financial and banking services in Singapore. Emphasis is placed on a meticulous market overview, target demographics, service offerings, and risk management methodologies. The business blueprint must underscore the organization's commitment to fostering a sustainable, profitable operational model conducive to Singapore's financial industry stability and growth.

Each application undergoes meticulous scrutiny by MAS, evaluating qualitative and quantitative aspects. Singapore's banking licensing framework is meticulously designed to ensure market access exclusively to financial institutions capable of significantly contributing to the nation's economic ecosystem while upholding exemplary management practices.

Procedure for applying for a banking licence in Singapore

The journey towards securing a banking licence in Singapore entails a systematic, multi-stage process, meticulously administered by the MAS.

Stage 1:

Preliminary consultation

Initiating the application process involves an initial dialogue with MAS. This preliminary discussion serves as a platform for elucidating licensing prerequisites and application intricacies. It offers invaluable insight into the procedural landscape, aiding in the early identification of potential challenges.

Stage 2:

Compilation of requisite documentation

Subsequently, meticulous attention is directed towards assembling all essential documents and information. Ensuring accuracy and completeness in documentation is paramount, underscoring the applicant's unwavering commitment to meeting MAS's exacting standards. A comprehensive list of necessary documents is provided below.

Stage 3:

Submission of application form

With the requisite documentation in hand, applicants proceed to submit a meticulously completed application form for a Singapore banking licence. Diligent adherence to MAS's stipulations is imperative now.

Step 4:

Payment of non-refundable application fee

Upon completion of the application, applicants are mandated to remit a non-refundable application fee. This fee, covering MAS's administrative expenses, underscores the seriousness of the applicant's intent. Compliance with MAS's directives regarding payment methods is imperative, ensuring seamless financial transactions.

Step 5:

Formal submission of application

The culmination of the process involves the formal submission of the comprehensive documentation package to MAS. This marks the official commencement of the banking licence application process in Singapore.

Stage 6:

Review and potential request for additional information

MAS meticulously scrutinizes the submitted documentation, with provisions for soliciting supplementary information or clarification as deemed necessary by the management.

Stage 7:

Receipt of decision on application

The denouement entails receiving a verdict on the application from MAS. Successful applicants are bestowed with a banking licence permit, sanctioning them to commence operations in conformity with established regulatory frameworks.

The processing duration for a banking licence application at MAS typically spans three to six months from the date of submission of the comprehensive documentation package. The precise timeframe is contingent upon factors such as application complexity, extant MAS workload, and expeditious provision of requested supplementary information.

Each phase of the Singapore banking licence application process necessitates meticulous preparation and a steadfast commitment to compliance. MAS's overarching objective is to uphold exacting standards within the nation's banking sector, warranting a thorough review of applicants' documentation to ensure adherence to regulatory requisites.

List of required documentation

Official letter of licence request signed by senior management
Detailed business plan encompassing banking activities, market strategies, product offerings, risk management, and financial projections
Recent audited financial statements
Profiles of key managers and shareholders, inclusive of resumes, industry experience, and ownership stakes
Endorsement letter from the originating country's regulatory authority for commencing banking operations in Singapore
Validation of risk management and internal control frameworks

Process for remitting non-refundable application fee

Securing a banking licence necessitates the payment of a stipulated fee, symbolizing the applicant's commitment and defraying a portion of administrative overheads. The fee, irrespective of application outcome, is non-refundable.

Below delineates the fee structure corresponding to various licence and permit categories under Singaporean legislation:

Legislation and category	Link code	Fee (in SGD)
Banking Law – Wholesale Bank	CA-BAW	20K
Banking Law – Merchant Bank	CA-BAM	20K
Banking Law - Representation	CA-BAR	5K
Securities and Futures Act - Approved Holding Companies	CA-SAHC	4K

Payment particulars, inclusive of bank details and transfer protocol, are furnished to MAS during the application phase. Upon remittance, applicants are advised to retain corroborative evidence of payment, requisite for subsequent verification by MAS. Accepted forms of documentation encompass bank receipts, account statements, or electronic transaction notifications.

Digital banking licence

The digital banking licence framework in Singapore stands as a cornerstone of the MAS strategic initiative to foster innovation and competition within the banking domain. This pioneering approach aims to allure both conventional financial entities and emerging market players, including technology and fintech enterprises keen on furnishing banking services in a digital milieu.

What sets apart a digital banking licence from its traditional counterpart is its endorsement of digital technology to enrich financial offerings whilst upholding paramount standards of security and user convenience. The advantages are manifold, spanning rapid introduction of innovative products and services, access to a broader customer base, and enhanced operational efficiency coupled with diminished transaction costs through automation and digitalization.

Issuance of a digital banking licence in Singapore mandates adherence to several criteria:

Financial stability: affirmation of financial stability and adequacy of resources to execute banking operations.
Business strategy: adoption of a sustainable, innovation-centric business model conducive to Singapore's financial sector advancement, inclusive of robust customer service and risk management strategies.
Risk management: implementation of robust risk management frameworks addressing credit, market, operational, and other inherent risks.
Technological readiness: presentation of a technology-driven banking services plan, ensuring the safeguarding and security of customer data.
Corporate governance: establishment of an effective and transparent corporate governance structure aligning with international standards.

The procedural pathway for acquiring a digital banking licence in Singapore mirrors a general approach akin to other banking licence categories, albeit with a nuanced emphasis on digital banking intricacies.

Application processing timelines may fluctuate, yet MAS endeavours to review all submissions expeditiously. It's imperative to note that successful attainment of a digital banking licence hinges not only on meeting prescribed criteria, but also on demonstrating a commitment to catalysing Singapore's financial industry evolution through innovation and service excellence.

Payment services licensing

In Singapore, authorization to conduct payment transactions spanning diverse services is conferred via payment system licensing. Categorized into regular payment systems and transaction-intensive systems, licensing criteria are contingent upon service nature and payment processing scale. Encompassed services range from invoice issuance, domestic and international fund transfers, business entity servicing, to digital currency issuance, and digital payment asset offerings.

A notable feature of Singapore's payment system regulatory framework is the prerequisite for managerial citizenship or permanent residency. This stipulation fosters managerial allegiance and adherence to local legislation. Financial prerequisites entail a minimum authorized capital of S$100K for conventional payment systems and S$250K for volume-intensive systems, coupled with a guarantee contribution of up to S$200K to MAS treasury.

Divergent from banking licence requisites, payment service licensing caters to payment process specifics, adapting to the dynamically evolving digital financial landscape and offering flexible, innovative, and secure payment approaches.

Advantages of banking operations in Singapore

Singapore's appeal as a banking destination is underpinned by various factors:

Strategic location: Situated at the nexus of the Asia-Pacific region, Singapore provides access to burgeoning growth markets like China, India, and Southeast Asia.
Economic and political stability: robust economic and political stability renders Singapore attractive to global investors and financial entities.
Progressive regulatory environment: MAS's progressive regulatory stance fosters innovation while upholding investor protection, promoting cutting-edge financial technologies and business models.
Economic transparency: Singapore boasts one of the world's most open economies, characterized by low corruption levels, high business transparency, and an efficient business milieu.
Tax incentives: competitive tax policies coupled with a plethora of bonuses and incentives fortify Singapore's allure for financial services and investment ventures.
Skilled workforce: Singapore's highly educated, multicultural populace offers access to proficient professionals in finance and banking.
Advanced infrastructure: state-of-the-art financial and information technology infrastructure underpins the stability of financial organizations.

Collectively, these attributes position Singapore as a preeminent and competitive banking destination on the global stage, promising unparalleled opportunities for expansion and advancement amid an evolving financial landscape.

Conclusion

For enterprises and financial institutions eyeing expansion in one of the world's premier financial hubs, the Republic of Singapore presents unmatched prospects for dynamic growth and innovation. However, securing licensing status mandates meticulous attention to application mechanics and strict adherence to regulatory mandates.

Given the intricacy of the process and the rigour of requirements, seeking professional counsel is strongly advised. Regulatory and licensing experts offer invaluable guidance, aiding in circumventing common pitfalls and significantly enhancing prospects of securing a licensing permit.

YB Case, a leading provider of legal consulting services, stands poised to be a trusted ally for entrepreneurs seeking a banking licence in Singapore. Endowed with profound regulatory acumen and MAS expertise, YB Case offers comprehensive support across all stages of the application journey.