(Reuters) – Singapore said on Thursday that foreign banks with a relatively large share of deposits in the city-state will be required to locally incorporate their retail operations, forcing them to commit capital here.
The new rules will apply to foreign banks that are important to the domestic market and which operate under Singapore’s so-called Qualifying Full Bank (QFBs) licence, Deputy Prime Minister Tharman Shanmugaratnam said in a speech to bankers attending an industry dinner.
QFBs enjoy greater privileges such as being able to open several branches in the city-state and accept retail deposits. In contrast, most other foreign banks are restricted to just one outlet in Singapore.
The latest announcement by Singapore is part of a global trend following the 2008 financial crisis for countries to ensure local depositors are better protected.
This will make it more expensive for banks as they will lose the benefit of managing their capital bases centrally.
Tharman, who is also the finance minister, said the central bank would consider granting foreign banks that incorporate locally and are sufficiently localised to open an additional 25 places of business, of which up to 10 may be branches.
Of the QFBs operating in Singapore, Citigroup is the only one that is incorporated locally, while Standard Chartered has announced plans to do so.
Other banks who operate under the QFB programme that allows them more branches in Singapore are Australia & New Zealand Banking Group Ltd, BNP Paribas, HSBC , ICICI Bank Ltd, Malaysia’s Malayan Banking Berhad and State Bank of India.
The government wants the local banks to maintain no less than 50 percent of local deposits, he said, reiterating a long-standing position.
By forcing these foreign banks to commit capital in Singapore, these banks may decide to compete more aggressively and provide more competition to local lenders DBS Group , United Overseas Bank and Oversea-Chinese Banking Corp.
“It is still too early for us to comment but we always welcome healthy competition,” said OCBC CEO Samuel Tsien.
(Reporting by Saeed Azhar; Editing by Kevin Lim)
Link : Singapore to get some foreign banks to incorporate locally