Singapore proposes bank oversight to capture influence over executives
The Monetary Authority of Singapore has proposed expanding its oversight of banks’ transactions with related parties to include individuals who can influence bank executives and directors, shifting beyond current regulations that primarily focus on persons or entities the bank executives themselves can control.
Presently, MAS Notice 643 defines a bank’s related parties as persons in six groups including the bank’s director group, senior management group and substantial shareholder group, as well as persons with conflicting interests as determined by the bank or MAS.
‘While this captures persons through which the bank’s executive officers and directors can exert influence on the bank, it may not capture persons that have significant influence over the executive officers and directors,’ MAS said in a consultation paper published earlier this month. ‘Such persons could influence the executive officers and directors to act in ways that conflict with the bank’s interests,’ it added, proposing these persons be subject to ‘related party transactions’ requirements to ensure appropriate monitoring and control of potential conflicts of interest.
MAS proposes to expand the definitions of ‘senior management group’ and ‘director group’ in Notice 643 to include persons that can exert significant influence over the bank’s executive officers or directors. Examples include persons that executives or directors are financially dependent on, and persons who have appointed directors as nominees to the bank’s board, formally or informally.
The proposals also introduce a new ‘indirect controller group’ as an additional related party category for Singapore-incorporated banks. This would include persons whose directions or instructions the bank’s directors are accustomed or obliged to follow, whether formally or informally, or who are positioned to determine the bank’s policies.
MAS will also narrow which intragroup transactions are excluded from related party transaction governance requirements. The exclusions will only apply to entities within groups subject to prudential requirements and consolidated supervision by a bank regulatory agency.
‘There has previously been extensive industry discussion on whether and to what extent intragroup transactions should be subject to these requirements,’ law firm Linklaters said in a note on the proposals. ‘MAS is proposing to tighten the scope of this exclusion and so we expect this proposed change in particular will ignite more industry debate.’
Linklaters added that given the large number of intragroup transactions typically existing between banks and other entities in the group, ‘we expect industry may have strong views on this proposal and will need to consider to what extent it impacts them’.
The proposals align with updated Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision in April 2024, which strengthened related party transaction risk management standards, MAS said.
The consultation period runs until 14 November and MAS aims for the amendments to be effective from 30 November 2026, or at least six months from issuance of the revised Notice 643, whichever is later.
The move follows a separate MAS proposal last week to enhance investor recourse through collective legal action and a grant scheme covering litigation costs for market misconduct claims, part of Singapore’s broader push to strengthen financial sector oversight.
