The Monetary Authority of Singapore (MAS) has announced regulatory changes to strengthen the resilience of finance companies and enhance their ability to provide financing to small and medium sized enterprises (SMEs).
complement banks, providing what are often more personalised
businesses. MAS will relax
that currently apply to
The limit on a finance company’s aggregate uncollateralised business loans will be
raised to up to 25% of its capital funds, from the current 10%. At the same time, the limit on
business loans to a single borrower will also be raised to up to 0.5% of capital funds, from the
current S$5,000. These
will better enable finance companies to serve their SME
customers, many of whom require
unsecured credit for working capital, MAS said.
Finance companies will be allowed to
offer current account and chequing services to
They will also be allowed to
join electronic payment networks,
including Inter-bank GIRO, Fast and Secure Transfers (FAST)
and Electronic Funds Transfer at
Point of Sale (EFTPOS).
These changes will enable finance companies to provide
comprehensive credit and deposit services to SMEs.
retain other regulatory
on finance companies, such
foreign currency exposures and derivatives trading. MAS will
finance companies to enhance their corporate governance and risk management.
rules on related party transactions and limits on
exposures to the property
MAS will phase in the above regulatory changes starting from this year.
MAS will further liberalise its existing policy of not allowing
foreign takeover of a finance
company. This will accord finance companies greater
to explore strategic
partnerships and innovative business models
that can strengthen their SME financing
Specifically, MAS is prepared to consider an application for a merger or acquisition if
the prospective merger partner or acquirer commits
to maintaining SME financing as a core
business of the finance company. In addition, the merger partner or acquirer must be able to
in SME financing
and present proposals to enhance the finance
company’s SME lending activities with new technologies, methodologies or business models.
Ong Chong Tee,
MD, MAS, said: “The
companies will facilitate
efforts to invest in
capabilities to enhance their core SME
financing business. These
part of MAS’
to ensure that our
continues to be able to
support enterprise development.”
There are three licensed finance companies in Singapore. In Q216, finance companies accounted for
just under S$7
billion of outstanding SME loans.