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A RECENT free trade agreement between the European Union and Singapore has paved the way for Standard Chartered Bank Singapore (StanChart Singapore) to raise its presence in the Republic.
StanChart Singapore has been freshly labelled as the country’s first Significantly Rooted Foreign Bank (SRFB), with the Monetary Authority of Singapore (MAS) looking to further boost the SRFB framework to possibly offer an additional full bank licence, the regulator said on Monday. This would allow an SRFB to set up a digital-only bank as a separate unit and with a smaller paid-up capital, in the same way the three Singapore banks can do so here.
For now, as an SRFB, StanChart is allowed 50 places of business (POBs), of which up to 35 may be branches. As a qualifying full bank (QFB), StanChart Singapore was allowed 25 POBs. It currently uses just 18 POBs, 16 of which are branches, a spokesperson said.
The SRFB framework was announced in 2012, with SRFBs only awarded as part of an overall package negotiated under FTAs with these QFBs’ home countries, and to QFBs that are “significantly rooted” here.
The first FTA that includes SRFB commitments, the EU-Singapore Free Trade Agreement (EUSFTA), entered into force on Nov 21, 2019. StanChart Singapore is also the first QFB to qualify for SRFB privileges under the EUSFTA commitments.
To deem a bank as one that has sunk deep roots here, MAS looks at the bank’s alignment of economic interests with Singapore, local business presence, and commitment to the Republic’s financial stability and development in the long term.
Singapore is StanChart’s second-largest market after Hong Kong.
In 2019, StanChart Singapore became the first and only international bank to incorporate all its businesses in Singapore. It said on Monday it is now the largest foreign banking subsidiary here with a US$80 billion balance sheet that is backed by US$6 billion of capital.
The bank is also the only international bank that has adopted Singapore as its global operational and innovation headquarters, with a significant share of its global management team based here, StanChart Singapore said.
In a media statement, Patrick Lee, chief executive officer of StanChart Singapore, said the bank – with a history in Singapore of more than 160 years – has “remained steadfast” in its commitment to Singapore.
“We see Singapore as a key market and are fully committed to future investments. We are also aligned with the government’s and the MAS’s strategy to grow Singapore’s stature as a global financial services hub, with leading and differentiated value-added areas of expertise.”
The bank said it is a “key employer” in the financial industry and is committed to develop and grow “future-ready talent” in Singapore.
Since 2018, it has upped its headcount from 8,000 to 10,000 to bolster the bank’s digital capabilities. More than 1,200 roles are in future growth areas such as digital banking, international banking, cloud technology, artificial intelligence, and application programming interfaces or APIs.
The bank will also invest another S$5 million to boost talent development and reskilling to support employment and skills across all stages of its employees’ career cycle, and continue its “active participation” in industry initiatives, said Mr Lee.
The awarding of privileges to StanChart Singapore under the SRFB framework comes as MAS said on Monday it will look to enhance the SRFB framework. With this, an SRFB that “substantially exceeds” the criteria for “significant rootedness” in Singapore may be given additional privileges. Notably, this includes being able to set up a separate subsidiary to house a digital-only bank.
The implication comes as MAS will consider granting an additional full bank licence under the enhanced SRFB framework. This would give an SRFB the same flexibility as Singapore-incorporated banking groups to set up subsidiaries to operate alternative business models.
The SRFB framework enhancement is “welcomed” by StanChart Singapore, said Mr Lee, adding that the bank would review its strategy and development plans with a view to invest more and deepen its presence here.
Since 2000, the three local banks have been allowed to set up qualifying units to operate new business models, with a lower paid-up capital of S$100 million. Such subsidiaries may also be established in alliance with joint-venture partners, so long as the Singapore-incorporated bank retains control over the venture.
While StanChart has set up a digital-only bank in Hong Kong, it is not able – for now – to apply to set up a digital full-bank subsidiary with a lower paid-up capital here under the existing Internet-only Bank (IOB) framework in Singapore.
All in, there are now nine QFBs in Singapore, and these QFBs are allowed to operate in more locations than non-QFBs. Of the nine, four – Citibank, Maybank, StanChart and HSBC – have locally incorporated at the minimum their retail businesses as required by MAS.
The Singapore-US FTA, which took effect in 2004, allows Citibank to open an unlimited number of branches in Singapore, which was, at a time before the advent of digital banking, a competitive advantage. It can also set up a digital full bank unit under the IOB framework.
There is no FTA between Singapore and Malaysia.
MAS said the enhanced SRFB framework will “strengthen the ability of SRFBs to complement the local banks as anchors to Singapore’s financial system”. But SRFB privileges, including the award of the additional full bank licence, will continue to be offered only under Singapore’s FTAs that contain SRFB commitments.
To determine if an SRFB “substantially exceeds” the baseline criteria, MAS will look at factors such as a full subsidiarisation of banking business operations in Singapore and having a significant proportion of global key appointment holders and business heads based in the Republic.
Another hurdle to meet is that the bank should have a Singaporean group as a substantial shareholder. In StanChart’s case, Temasek Holdings is one of its shareholders.
MAS will also assess the bank on its “firm commitment” to Singapore’s financial stability and development in the long term. The lender should have significant headcount here and develop the talent pipeline in the country. The regulator would review too if the bank participates in key industry initiatives, and commits to developing and deepening business lines in the Republic.
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