Financial services licensing and regulations in Singapore

This article is a guide to regulations affecting financial services in Singapore and how they impact the issuance of licenses in this field. It offers a broad overview of the supervisory role played by the Monetary Authority of Singapore, the types of financial services regulated by this governmental body, licenses necessary for conducting business in this sphere, and other information pertinent to starting a financial services venture in Singapore.

Introduction

A well-functioning financial system is vital for the economy, businesses and consumers in any country. Consequently, a financial regulatory regime is necessary to ensure the safety and soundness of the financial system and protecting consumers. Financial regulations are laws that govern banks, payment institutes, investment advisory firms, insurance companies, etc. They aim to protect consumers from hidden financial risks and fraud.

Singapore is ranked as one of the world’s leading financial centers, offering world-class options in banking and related financial services for individual and corporate clients. This article seeks to answer some of the most common questions about when, why, and how to get a license if your business relates to financial services in Singapore.

What are the objectives of MAS regulations

The governmental body that supervises the financial services market in Singapore and consequently oversee all licensing matters is the Monetary Authority of Singapore (MAS); it is Singapore’s central bank as well as its integrated financial regulator. MAS takes a holistic approach to managing systemic financial risk. MAS’ mandate is to foster a sound financial services sector through prudent oversight of all financial institutions in Singapore — banks, insurers, capital market intermediaries, financial advisors, and stock exchanges. It is also responsible for well-functioning financial markets and sound conduct in this sector.

The main objectives of MAS’ licensing regime are:

  • To protect the safety of consumers;
  • To hold businesses accountable for their actions and behavior;
  • To ensure the level of expertise a particular professional possesses;
  • To ensure the quality of payment systems and other technical aspects of financial services;
  • To safeguard Singapore’s financial system and financial stability by monitoring and managing systemic financial risk.

Obviously, strict supervision of the financial services industry is essential.

What businesses are regulated by the MAS?

If you plan to start a Singapore venture in any of the following sectors, you must obtain a business license before beginning operations:

  • Payments;
  • Banking;
  • Capital markets;
  • Financial advisory;
  • Insurance.

Below we will review in detail the particular businesses that must coordinate their activities with the MAS before starting operations and describe the relevant licensing regimes.

Payments

What types of services are covered?

The Payments category covers the following:

  • Standard payment institutions. Under this license, you may provide any combination of the following payment services: account issuance, money transfer, international money transfer, merchant acquisition, money-changing, e-money issuance, digital payment token services. However certain transaction thresholds will apply;
  • Major payment institutions. Businesses holding this type of licenses can carry out all the mentioned seven types of payment services above the specified thresholds;
  • Credit and charge card issuing companies;
  • Money-changing companies;
  • Designated payment system operators;
  • Designated payment system settlement institutions.

Licensing regime

Payment services in Singapore are regulated by the Payment Services Act, which outlines a special licensing regime for all of them. You can review our guide to Singapore's Payment Services Act for detailed information on this. If you need assistance with your license application, please contact us.

Banking

What institutions are covered?

  • Full Banks may undertake universal banking, including the following activities:
    • Deposit taking;
    • Cheque services and lending;
    • Any other businesses regulated or authorised by MAS, including financial advisory services, insurance brokering, and capital market services.
  • Wholesale Banks may engage in the same range of banking business as full banks, except that they do not carry out Singapore dollar retail banking activities.
  • Merchant Banks may carry out the following activities:
    • Lending;
    • Asset management;
    • Private banking;
    • Securities dealing and underwriting;
    • Investment banking.
  • Qualifying Full Bank is a special scheme developed for foreign banks. Foreign full banks with Qualifying Full Bank status may enjoy certain privileges.
  • Finance Companies are permitted to engage in:
    • Deposit taking
    • Lending to individuals and corporations, including SMEs.

Licensing regime

Financial institutions (FIs) wishing to conduct banking business in Singapore must meet the MAS's admission criteria and obtain the relevant license. Below are guidelines for obtaining a business license for two typical banking institutions in Singapore —  wholesale banks and merchant banks.

What are the admission criteria?

MAS takes the following factors into consideration when assessing an application to conduct banking business:

  • Financial soundness, track record, world ranking, and reputation of the FI, parent company and major shareholders;
  • Strength of home country supervision, including the willingness and ability of the home supervisory authority to cooperate with MAS, and its framework for cross-border cooperation;
  • Written consent from the home country supervisory authority for establishing a banking operation in Singapore;
  • Well thought-out strategy for banking and financial services in Singapore, and sound business plans to ensure sustained economic viability;
  • Robust risk management systems and processes that are commensurate with the FI's size and proposed business.

Before you apply

Before submitting a formal application, you are encouraged to contact MAS about your plans. Discussing the licensing requirements at an early stage helps to identify issues that may affect the proposed application. If you need help, refer to the MAS website for detailed instructions or contact us.

Capital markets

Capital markets are another financial services sector supervised by MAS.

What types of institutions are covered?

Singapore law states that the following types of businesses belong to capital markets institutions and relevant licenses are required:

  • Capital Markets Service provider
  • Collective Investment Schemes (CIS) Trustee — a firm acting as a trustee for CIS which are authorised for offer to retail investors and constituted as a unit trust.
  • Fund Management Company  — an entity that raises and manages third-party investors’ funds in a CIS.
  • Trust Company — a firm that provides trust services such as creation of a trust, acting as trustee, or providing trust administration services.
  • Exchange; Market Operator — entities operating an organized market for securities, derivatives contracts, or units in a CIS. Markets that are systemically important will be regulated by MAS as Exchanges. Other markets may be regulated as Market Operators. Exchanges are subject to heightened scrutiny and are required to comply with more stringent obligations than those required of Market Operators.
  • Clearing House — an entity that offers clearing or settlement services in Singapore.
  • Trade Repository — an entity offering trade reporting services to allow participants to fulfil their obligations under MAS’s reporting mandate.
  • Benchmark Administrator — an entity administering a designated group of securities.

Licensing regime

All of the above activities are regulated by MAS and require a special license or approval. The most common type of license in this sector is the Capital Markets Services (CMS) License, which is applicable to the following regulated activities:

  • Dealing in capital markets products;
  • Advising on corporate finance;
  • Fund management;
  • Real estate investment trust management;
  • Product financing;
  • Providing credit rating services;
  • Providing custodial services for securities.

Thus, if your company wishes to conduct any of the above-regulated activities, it must hold a CMS licence.

What are the admission criteria?

When assessing an application for a CMS licence, MAS takes into account factors such as:

  • Fitness and propriety of the applicant, its shareholders and directors.
  • Track record and management expertise of the applicant and its parent company or major shareholders.
  • Ability to meet the minimum financial requirements.
  • Strength of internal risk management and compliance systems.
  • Business model or plans, projections, and the associated risks.

Your company will also need to appoint the following individuals before applying:

  • Minimum of 2 directors, at least one of whom should be a resident of Singapore.
  • Chief Executive Officer with at least 10 years of relevant experience and resident in Singapore.
  • Minimum of 2 full-time Singapore-based individuals for each regulated activity.

How much is the application fee?

When applying for a CMS license, a non-refundable application fee of $1,000 is required.

What is the processing time required?

It usually takes no more than 4 months for MAS to review and process an application if the business model is straightforward, the applicant meets the relevant admission criteria fully, and the application is complete and clear. For more complex cases, or cases where information is assessed to be incomplete or inaccurate, MAS will likely need more time to review the application.

If you need assistance with CMS license, feel free to contact us.

Financial advisory

A Singapore company must hold a Financial Adviser (FA) licence to conduct financial advisory services regulated under the Financial Advisers Act (FAA), unless exempted. Individuals representing licensed FAs or exempt FAs need to be appointed as representatives of FAs.

What types of services are covered?

  • Any financial advisory service,
    unless exempt.

    Typically, the exemption is provided to institutions that are covered by a more stringent license than the FA license.

The following businesses are exempted from holding a financial adviser’s licence:

  • A bank licensed under the Banking Act;
  • An insurance company licensed under the Insurance Act;
  • A holder of a CMS licence;
  • A finance company that has been granted an exemption to provide financial advisory services under the Finance Companies Act;
  • An approved exchange or a recognised market operator regarding any financial advisory service that is incidental to its operation.

Licensing regime

What are the admission criteria?

When assessing an application for an FA licence, MAS will take into account the following  factors:

  • Fitness and propriety of the applicant, its shareholders and directors;
  • Track record, management expertise, and financial soundness of the applicant and its parent company or major shareholders;
  • Ability to meet the minimum financial requirements and professional indemnity insurance requirements prescribed under the FAA;
  • Strength of internal compliance systems;
  • Business plans and projections.

Your company will also need to appoint the following employees:

  • Minimum of 2 directors, at least one of whom should be a resident of Singapore;
  • Chief Executive Officer with at least 10 years of relevant experience, of which at least 5 years must have been in a managerial capacity, and who is resident in Singapore;
  • Minimum of 3 full-time Singapore-based individuals who have at least 5 years of relevant working experience.

Base capital requirement

If your company only advises others by issuing or promulgating research analyses or research reports concerning investment products, you are required to maintain a minimum base capital of S$250,000. For all other types of financial advisory activities, you are required to maintain a minimum of S$500,000, or a lower base capital of S$300,000 plus additional professional indemnity insurance of S$500,000.

Financial resources requirement

You are required to maintain financial resources that are the higher of:

  • 25% of your relevant annual expenditure for the preceding financial year; or
  • S$150,000.

How much is the application fee?

You will need to pay a non-refundable application fee of S$500.

What is the processing time required?

It usually takes no more than 4 months for MAS to review and process an application if the business model is straightforward, the applicant meets the relevant admission criteria fully, and the application is complete and clear. For more complex cases, or cases where information is assessed to be incomplete or inaccurate, MAS will need more time to review the application.

If you need assistance with your FA license, you can contact us.

Insurance

What types of services are covered?

The insurance category covers the following types of businesses:

  • Direct insurers (Life) — companies that write life policies as well as long-term accident and health policies;
  • Direct insurers (General) — companies that write all insurance business other than life policies and long-term accident and health policies;
  • Direct insurers (Composite) — firms that write both life and general insurance business;
  • Reinsurers — companies that write life or general reinsurance business in Singapore. They are not permitted to write direct business and are only allowed to assume all or a part of the insurance or reinsurance risk written by another insurer;
  • Captive insurers — companies that write insurance business which consists principally of risks of its related corporations;
  • Company established under Lloyd's Asia Scheme. Foreign companies may carry on insurance business in Singapore through locally incorporated service companies, which are registered with Lloyd’s of London (Asia) Pte Ltd, the approved Administrator of the scheme;
  • Approved Marine, Aviation, and Transit (MAT) insurers do not have a physical presence in Singapore. They do not write insurance business, other than the collection or receipt of premiums in relation to MAT insurance business;
  • Authorised reinsurers do not have a physical presence in Singapore. They provide reinsurance of liabilities under insurance policies to persons in Singapore, and can be authorised as general reinsurers or life reinsurers;
  • General Insurance Agents arrange contracts of insurance for direct general insurers.

All of the above activities are regulated by MAS and require obtaining a special license. Below we will review one of the most common types of licenses applicable to direct life and general insurers.

Licensing regime

Admission Criteria

MAS assesses applications for direct life and general insurance licences using the following criteria:

  • Domestic and international rankings of the applicant by factors such as premiums and assets;
  • Past and present credit ratings by international rating agencies;
  • Track record, financial soundness and reputation, including the applicant’s compliance with its home regulations. In assessing this criterion, MAS will consult the applicant's home supervisory authority;
  • Experience in product innovation, use of alternative business distribution channels, and expertise in specialist and niche fields;
  • Well-developed business strategy and detailed plans that reflect the risk profile of the business;
  • Robust risk management systems and processes that are commensurate with the size and complexity of the business;
  • Fitness and propriety of the licensee, any director or key executive person, all of its substantial shareholders, and all persons having effective control of the licensee.

Before you apply

Before submitting a formal application, you are encouraged to contact the Insurance Department of MAS about your plans.

How to apply?

To apply, you should submit the Application to Carry on Insurance Business in Singapore to the MAS.

How much is the application fee?

You will need to pay a non-refundable application fee. The amount is calculated by MAS on a case-by-case basis.

What is the processing time required?

Processing and approval will take approximately 6 to 8 weeks after MAS receives the complete application. As each application is evaluated on a case-by-case basis, processing time depends on the circumstances of each company and the completeness of the information submitted.

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Summary

As an integrated financial supervisor, MAS is tasked with fostering a sound financial services sector in Singapore through its prudent oversight of all financial institutions — banks, insurers, capital market intermediaries, financial advisors, stock exchanges and others. MAS strives to strike a balance between consumer protection and innovation in the services available in the financial market.

If you plan to launch a financial services related venture in Singapore, our corporate services team can help you with the necessary information, set up your company, and apply for the relevant business license for you.

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