No. S 256
Banking Act
(Chapter 19)
Banking (Amendment) Regulations 2004
In exercise of the powers conferred by sections 30 (1)(d), 32(5)(b), 33(2)(d), 35(2)(e) and 78(1) and (3) of the Banking Act, the Monetary Authority of Singapore hereby makes the following Regulations:
Citation and commencement
1.  These Regulations may be cited as the Banking (Amendment) Regulations 2004 and shall come into operation on 5th May 2004.
Amendment of regulation 2
2.  Regulation 2 of the Banking Regulations 2001 (G.N. No. S 347/2001) (referred to in these Regulations as the principal Regulations) is amended —
(a)by inserting, immediately after the definition of “funds of a customer under management”, the following definitions:
“ “liabilities”, in relation to the policies of an insurance fund maintained by an insurer, means such liabilities and expenses of the insurer as are attributable to the business to which the insurance fund relates, but excludes any levy payable by that insurer under section 46 of the Insurance Act (Cap. 142);
“market day”, in relation to a share traded on a securities exchange, means any day which the securities exchange is open for trading of shares;”; and
(b)by inserting, immediately after the definition of “Singapore Government Securities”, the following definition:
“ “subsidiary” has the same meaning as in section 5 of the Companies Act (Cap. 50);”.
Amendment of regulation 3
3.  Regulation 3 of the principal Regulations is amended —
(a)by deleting the words “dealer or investment advisor licensed under the Securities Industry Act (Cap. 289)” in paragraph (a) and substituting the words “holder of a capital markets services licence under the Securities and Futures Act (Cap.289)”; and
(b)by deleting paragraph (b).
Amendment of regulation 8
4.  Regulation 8 of the principal Regulations is amended by inserting, immediately after paragraph (2), the following paragraph:
(3)  Any bank which contravenes this regulation shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine of $10,000 for every day or part thereof during which the offence continues after conviction.”.
New Parts VI, VII, VIII and IX
5.  The principal Regulations are amended by inserting, immediately after regulation 10, the following Parts:
PART VI
EXCLUSION OF NON-BENEFICIAL INTERESTs IN OR RIGHTS OVER IMMOVABLE PROPERTY
Exclusion of non-beneficial interests in or rights over immovable property from section 33 of Act
11.  For the purposes of determining the aggregate value of the interest in or right over immovable property referred to in section 33(1) of the Act, there shall be excluded such portion of the value of any interest in or right over immovable property or any part thereof held for the benefit of persons other than the bank pursuant to an obligation imposed under any written law, rule of law, contract or order of court.
PART VII
COMPUTATION OF MAJOR STAKES
Meaning of “affiliated entity”
12.—(1)  In this Part and Part VIII, “affiliated entity”, in relation to a bank, means —
(a)any subsidiary of the bank;
(b)any company in which the bank and its subsidiaries hold in the aggregate a beneficial interest in not less than 20% of the share capital;
(c)any company in which the bank and its subsidiaries control in the aggregate not less than 20% of the voting power;
(d)any other company where the directors of the company are accustomed or under an obligation, whether formal or informal, to act in accordance with the bank’s directions, instructions or wishes, or where the bank is in a position to determine the policy of the company; or
(e)any subsidiary of a company referred to in sub-paragraph (b), (c) or (d).
(2)  Notwithstanding paragraph (1)(a), (b), (c) or (e), any beneficial interest in the share capital of, or control of voting power in, a company that is —
(a)acquired by a bank or any entity referred to in paragraph (1) (referred to in this paragraph as the relevant entity) pursuant to an arrangement with a person who has a trading account with the relevant entity, and transferred to the trading account of that person within 2 market days from the date of acquisition; or
(b)acquired or held by the relevant entity in the course of satisfaction of debts due to it and disposed of at the earliest suitable opportunity,
shall be excluded for the purpose of determining whether the company is an affiliated entity of the bank.
(3)  Notwithstanding paragraph (1)(c), any control of voting power in a company that is held by the bank or its subsidiary —
(a)for the benefit of any person other than the bank or its subsidiary, or any other affiliated entity of the bank (referred to in this paragraph as the beneficiary) pursuant to an obligation imposed under any written law, rule of law, contract or order of court; and
(b)used or exercised by the bank or its subsidiary primarily for the benefit of the beneficiary,
shall be excluded for the purpose of determining whether the company is an affiliated entity of the bank, unless —
(i)the control of voting power in the company is held by a bank’s subsidiary that is an insurer registered under the Insurance Act (Cap. 142), through —
(A)any insurance fund established and maintained under the Insurance Act for its general business;
(B)any insurance fund established and maintained under the Insurance Act for its non-participating policies;
(C)any insurance fund established and maintained under the Insurance Act for its participating policies, and which relates to assets held other than for the purpose of meeting the liabilities in respect of the policies of the insurance fund; or
(D)any insurance fund established and maintained under the Insurance Act for its investment-linked policies, and which relates to assets held other than for the purpose of meeting those liabilities in respect of the policies of the insurance fund, the values of which are dependent on the value of the underlying assets; or
(ii)the Authority (having regard to the specific circumstances of the case including whether the bank or its subsidiaries has investment and voting policies that comply with guidelines issued by the Authority) is of the opinion that the control of voting power in the company is in fact not being used or exercised primarily for the benefit of the beneficiary, and the Authority issues a declaration by notice in writing to the bank that such control of voting power in the company shall, with effect from the date of the declaration, be included for the purpose of determining whether that company is an affiliated entity of the bank.
(4)  Notwithstanding paragraph (1)(e), where a company referred to in paragraph (1)(b) or (c) is not an affiliated entity of the bank by virtue of paragraph (2) or (3), its subsidiary shall correspondingly not be regarded as an affiliated entity of the bank.
Holding by affiliated entity deemed to be holding by bank
13.—(1)  In determining whether a bank holds a major stake in a company as defined in section 32(7) of the Act —
(a)any beneficial interest in the share capital of a company held by an affiliated entity of the bank shall be deemed to be a beneficial interest in that share capital held by that bank;
(b)any control of voting power in a company held by an affiliated entity of the bank shall be deemed to be a control of such voting power held by that bank; and
(c)any interest in a company (where the directors of the company are accustomed or under an obligation, whether formal or informal, to act in accordance with the bank’s directions, instructions or wishes, or where the bank is in a position to determine the policy of the company) held by an affiliated entity of the bank shall be deemed to be an interest held by that bank.
(2)  Paragraph (1) shall not apply to any beneficial interest in the share capital of, control of voting power or interest in, a company that is acquired or held by an affiliated entity and transferred or disposed of by the affiliated entity in the manner referred to in regulation 12 (2)(a) or (b).
(3)  Paragraph (1)(b) or (c) shall not apply to any control of voting power or interest in a company that is held by an affiliated entity of a bank —
(a)for the benefit of any person other than the affiliated entity, the bank or any other affiliated entity of the bank (referred to in this paragraph as the beneficiary), pursuant to an obligation imposed under any written law, rule of law, contract or order of court; and
(b)used or exercised by that affiliated entity primarily for the benefit of the beneficiary,
unless —
(i)that affiliated entity is an insurer registered under the Insurance Act (Cap. 142), and it holds the control of voting power or interest in the company through any of the insurance funds specified in regulation 12 (3) (i) (A) to (D); or
(ii)the Authority (having regard to the specific circumstances of the case including whether the affiliated entity has investment and voting polices that comply with guidelines issued by the Authority) is of the opinion that the control of voting power or interest in the company is in fact not being used or exercised primarily for the benefit of the beneficiary, and the Authority issues a declaration by notice in writing to the bank that paragraph (1)(b) or (c), as the case may be, shall, with effect from the date of the declaration apply to the control of voting power or interest in the company held by that affiliated entity.
Affiliated entity over which the bank has no effective control
14.—(1)  Where a company falls within the definition of “affiliated entity” under regulation 12 (1)(a), (b), (c) or (e), but not regulation 12 (1)(d), and the Authority is satisfied that —
(a)the affiliated entity is not under the effective control of the bank; and
(b)the bank is not exposed to any material risk by virtue of that affiliated entity’s beneficial interest in the share capital of, control of voting power or interest in, other companies,
the Authority may, by notice in writing to the bank, declare that regulation 13 (1) shall not apply to any beneficial interest in the share capital of, control of voting power in or interest in, any company held by that affiliated entity, and in such event, regulation 13 (1) shall not apply accordingly with effect from the date specified in the declaration, until such time as the declaration is revoked.
(2)  The Authority may upon making a declaration under paragraph (1) and from time to time, impose such conditions as the Authority considers appropriate and if any of the conditions are not complied with at any time, the Authority may revoke the declaration by notice in writing to the bank.
(3)  Without prejudice to paragraph (2), the Authority may, by notice in writing to a bank, revoke a declaration made under paragraph (1) if the Authority is satisfied that —
(a)the affiliated entity has come under the effective control of the bank; or
(b)the bank has become exposed to material risk by virtue of that affiliated entity’s beneficial interest in the share capital of, control of voting power or interest in, other companies,
and in such event, regulation 13 (1) shall apply to that affiliated entity accordingly with effect from the date specified in the notice of revocation.
(4)  Without prejudice to paragraph (3), a declaration under paragraph (1) shall automatically be revoked if and when the affiliated entity falls within the definition of “affiliated entity” under regulation 12 (1)(d), whether or not that affiliated entity continues to fall within the definition of “affiliated entity” under regulation 12 (1)(a), (b), (c) or (e).
PART VIII
LIMITATION OF MUTUAL SHAREHOLDINGS
Definitions of this Part
15.  In this Part —
“holding company” has the same meaning as in section 5 of the Companies Act (Cap.50);
“qualified major stake company”, in relation to a bank, means an affiliated entity of the bank in which the bank is deemed, by virtue of section 32(7) of the Act and Part VII of these Regulations, to hold a major stake;
“share”, in relation to a bank or the financial holding company of a bank, means a share in the share capital of the bank or the financial holding company of the bank, as the case may be, and includes an interest in such a share.
Limitation of mutual shareholdings
16.—(1)  No qualified major stake company of a bank incorporated in Singapore shall acquire or hold shares in the bank which has the effect of enabling it, whether alone or jointly with other qualified major stake companies of the bank, to control more than 2% of the voting power in the bank.
(2)  No qualified major stake company of a bank incorporated in Singapore shall acquire or hold shares in any holding company of the bank which has the effect of enabling it, whether alone or jointly with other qualified major stake companies of the bank, to control more than 2% of the voting power in the holding company.
(3)  No qualified major stake company of a bank incorporated in Singapore shall acquire or hold shares in the bank and any of the holding companies of the bank which has the effect of enabling it, whether alone or jointly with other qualified major stake companies of the bank, to control —
(a)any percentage of the voting power in the bank; and
(b)any percentage of the voting power in any of the holding companies of the bank,
such that the sum total of the percentages referred to in sub-paragraphs (a) and (b) (notwithstanding that they are percentages of voting powers in different companies) exceeds 2.
(4)  No bank incorporated in Singapore shall cause or knowingly permit any of its qualified major stake companies to acquire or hold shares in the bank or any holding company of the bank in contravention of paragraphs (1), (2) or (3).
(5)  For the purposes of determining whether there is a contravention of paragraph (1), (2), (3) or (4), any control of voting power in a bank or any holding company of the bank that is held by a qualified major stake company of that bank —
(a)for the benefit of any person other than the qualified major stake company or any other qualified major stake company of that bank (referred to in this paragraph as the beneficiary), pursuant to an obligation imposed under any written law, rule of law, contract or order of court; and
(b)used or exercised by the qualified major stake company for the benefit of the beneficiary,
shall be disregarded, unless —
(i)the qualified major stake company is an insurer registered under the Insurance Act (Cap. 142), and the control of voting power is held by it through any of the insurance funds specified in regulation 12 (3) (i) (A) to (D); or
(ii)the Authority (having regard to the specific circumstances of the case including whether the qualified major stake company has investment and voting policies that comply with guidelines issued by the Authority) is of the opinion that the control of voting power in the bank or holding company of the bank is in fact not being used or exercised primarily for the benefit of the beneficiary, and the Authority issues a declaration by notice in writing to the qualified major stake company that such control of voting power in the bank or holding company of the bank shall, with effect from the date of the declaration, be included for the purpose of determining whether there is a contravention of paragraph (1), (2), (3) or (4).
Qualified major stake company over which the bank has no effective control
17.—(1)  Where a qualified major stake company falls within the definition of “affiliated entity” of a bank under regulation 12 (1)(a), (b), (c) or (e) but not regulation 12 (1)(d), and the Authority is satisfied that —
(a)the company is not under the effective control of the bank; and
(b)the bank is not exposed to any material risk by virtue of that company’s beneficial interest in the share capital of, control of voting power or interest in, other companies,
the Authority may, by notice in writing to the bank, declare that any shares held by that company in the bank or any holding company of the bank, shall be excluded for the purpose of determining whether there is a contravention of regulation 16 (1), (2), (3) or (4) and in such event, the exclusion shall take effect from the date specified in the declaration until such time as the declaration is revoked.
(2)  The Authority may upon making a declaration under paragraph (1) and from time to time, impose such conditions as the Authority considers appropriate and if any of the conditions are not complied with at any time, the Authority may revoke the declaration by notice in writing to the bank.
(3)  Without prejudice to paragraph (2), the Authority may, by notice in writing to a bank, revoke a declaration made under paragraph (1) if the Authority is satisfied that —
(a)the company has come under the effective control of the bank; or
(b)the bank has become exposed to material risk by virtue of that company’s beneficial interest in the share capital of, control of voting power or interest in other companies,
and in such event, any shares held by that company in the bank or any holding company of the bank shall, with effect from the date specified in the notice of revocation, be included for the purpose of determining whether there is a contravention of regulation 16 (1), (2), (3) or (4).
(4)  Without prejudice to paragraph (3), a declaration under paragraph (1) shall automatically be revoked if and when the company falls within the definition of “affiliated entity” under regulation 12 (1)(d), whether or not the company continues to fall within the definition of “affiliated entity” under regulation 12 (1)(a), (b), (c) or (e).
Offences, penalties and defences
18.—(1)  Any person who contravenes regulation 16 shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000 and, in the case of a continuing offence, to a further fine of $2,500 for every day or part thereof during which the offence continues after conviction.
(2)  A qualified major stake company of a bank shall not be guilty of an offence in respect of a contravention of regulation 16 (1), (2) or (3) if the qualified major stake company proves that —
(a)it became a qualified major stake company of the bank by virtue of, or the contravention resulted from, circumstances beyond its control; or
(b)it had, at the time of its acquisition or holding of shares in the bank or any holding company of the bank, reasonable grounds for believing that such acquisition or holding would not result in a contravention of regulation 16 (1), (2) or (3), as the case may be,
and it had, within 14 days of becoming aware of the contravention, notified the Authority in writing of the contravention and taken such action as directed by the Authority within such time as may be determined by the Authority.
(3)  A bank shall not be guilty of an offence in respect of a contravention of regulation 16 (4) if the bank proves that —
(a)the contravention resulted from circumstances beyond its control; or
(b)it did not know and had no reason to suspect that there was an acquisition or holding of shares in itself or any of its holding companies by its qualified major stake company or companies which would result in it being in contravention of regulation 16 (4),
and it had, within 14 days of becoming aware of the contravention, notified the Authority in writing of that contravention, and taken such action as directed by the Authority within such time as may be determined by the Authority.
(4)  Except as provided in paragraphs (2) and (3), it shall not be a defence for a person charged with an offence in respect of a contravention of regulation 16 to prove that the person did not intend to or did not knowingly contravene regulation 16.
Grace period for mutual shareholdings
19.—(1)  Where a qualified major stake company of a bank would, but for this paragraph, be guilty of an offence under regulation 18 (1) by virtue of its shareholding in the bank or any of the bank’s holding companies immediately before 5th May 2004, it shall not be so liable under that regulation until 17th July 2006 provided that it does not do any act that causes an increase in such shareholding.
(2)  Where a bank would, but for this paragraph, be guilty of an offence under regulation 18 (1) by virtue of its qualified major stake company’s shareholding in itself or any of its holding companies immediately before 5th May 2004, it shall not be so liable under that regulation until 17th July 2006 provided that it does not cause or permit its qualified major stake company to do any act that causes an increase in such shareholding.
PART IX
PRESCRIBED property-related BUSINESSES
Definitions of this Part
20.  In this Part —
“building” means any immovable property that has undergone development as defined in section 3 of the Planning Act (Cap. 232);
“foreclosed property”, in relation to a bank in Singapore or major stake company, means the whole or any part of any residential, commercial or industrial land or building that has been acquired by the bank or company, as the case may be, acting in its capacity as the mortgagee of the whole or that part of the land or building, as the case may be, pursuant to an action for foreclosure;
“investment property”, in relation to a bank in Singapore or major stake company, means the whole or any part of any residential, commercial or industrial land or building that has been acquired or is held by the bank or company, as the case may be, as an investment;
“land” means any immovable property that has not undergone development as defined in section 3 of the Planning Act;
“major stake company”, in relation to a bank in Singapore, means a company in which the bank has acquired or holds a major stake with the prior approval of the Authority under section 32(1) of the Act;
“property enhancement” means —
(a)in relation to a building, the carrying out of any works for the refurbishment, improvement or alteration of, or addition to, the building which —
(i)do not amount to demolition or reconstruction of the building; and
(ii)do not vary the gross floor area of the building by more than 20%; and
(b)in relation to any part of a building, the carrying out of any works for the refurbishment, improvement or alteration of, or addition to, that part of the building which —
(i)do not amount to demolition or reconstruction of that part of the building; and
(ii)do not vary the gross floor area of that part of the building by more than 20%;
“property management”, in relation to the whole or any part of any land or building, means the maintenance and management of the whole or that part of the land or building, as the case may be, and includes the procurement of security services and lease and tenancy administration in relation to the whole or that part of the land or building, as the case may be, but does not include property enhancement.
Prescribed property-related businesses
21.  For the purposes of section 30(1)(d) of the Act, the Authority hereby prescribes the following property-related businesses as businesses that any bank in Singapore may carry on, or enter into any partnership, joint venture or other arrangement with any person to carry on:
(a)the business of providing property management services in relation to —
(i)any investment property that has been acquired or is held by the bank or any major stake company of the bank;
(ii)any foreclosed property that has been acquired by the bank or any major stake company of the bank; or
(iii)the whole or any part of any building that is occupied and used —
(A)by the bank for the carrying on of any business or class of business referred to in section 30(1) of the Act; or
(B)by any major stake company of the bank for the carrying on of that company’s business;
(b)the business of managing and coordinating property enhancement works in relation to —
(i)any property referred to in paragraph (a)(i) or (ii) that is a building; or
(ii)any building referred to in paragraph (a)(iii).”.

Made this 4th day of May 2004.

KOH YONG GUAN
Managing Director,
Monetary Authority of Singapore.
[SPD 09/2000; AG/LEG/SL/19/2003/1 Vol. 1]