Singapore banks to simplify regulations

Reuters reported this week that Singapore intends to simplify financial regulations that require banks to separate international operations from the domestic and into accounting entities.

Since the 1960s, banks have divided their local and offshore operations into Domestic Banking Units (DBU) and Asian Currency Units (ACU) in order to increase the growth of the Asian Dollar Market, alongside keeping the Singapore banking system secure.

The ACU usually holds a bank’s offshore operations which are fully denominated in foreign currency, like the US dollar. The DBU, on the other hands mainly deals in Singapore dollars and focuses on domestic operations.

Deputy prime minister and chairman of Singapore’s central bank, Tharman Shanmugaratnam, believes that the divide between the DBU and ACU that the banks have to comply with does not make sense. “If we continue with the divide, it would merely impose undue administrative burden on banks, without materially enhancing prudential soundness of systemic stability,” Shanmugaratnam said.

Shanmugaratnam also highlighted that the enhanced global and domestic regulatory standards had reduced the relevance of the DBU and ACU divide, according to Reuters.

The Monetary Authority of Singapore is expected to give details of new regulations in a consultation by August and the country will phase the rules in over time.

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