Sat, 10 Dec 2022

Overview of Banking Experience in Singapore

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14 Nov 2022, 03:24 GMT+10

Singapore is a thriving financial hub of renown, serving not only the Asia Pacific area as a whole but also its own home economy. As a result, the country's banking sector is a major player and is quickly becoming one of the strongest in the world. After Japan and Hong Kong, Singapore is the third-largest international finance center in Asia because of factors like a stable economic and political climate, favorable legal and tax rules, a reputation for integrity, and disciplined enforcement against crime and money laundering.

In Singapore, there are many different kinds of banks, divided into domestic and foreign banks. The Monetary Authority of Singapore oversees all of the nation's commercial banks.

This article will outline the essential components of Singapore's banking system and describe a new, rapidly expanding category of banks operating there.

Singapore Banking System

Singapore is renowned for being an Asian financial center with close ties to the rest of the world. Most regional offices for Asia are located in this nation, which has also served as a point of entry for foreign companies looking to enter the Asian market. You are likely traveling to the country to incorporate your firm for a number of reasons, one of which is this.

Almost no other economic sector contributes more significantly to this accomplishment than the country's banking system. Singapore's banking system is well regarded for offering top-notch services to clients domestically and internationally.

The following elements have helped the banking sector in Singapore succeed:

  • Market liberalization for domestic banks.
  • Through mergers and acquisitions, local banks expanded their geographic reach.
  • Foreign banks' growth, some of which turned Singapore into a regional or even global hub for essential banking services, boosted competition.
  • More intense rivalry encouraged the creation of novel items and aggressive price strategies.
  • In addition to conventional lending and deposit-taking activities, the provision of specialized banking services such as corporate and investment banking activities.
  • Growth in private banking was caused by stringent banking secrecy regulations, tax-friendly legislation, and a variety of wealth management services. To meet growing demand from Asian and European clients, Swiss behemoths Credit Suisse Group and UBS AG have expanded their private banking operations in Singapore.
  • Recognizing and meeting the needs of small and medium-sized businesses, which comprise a substantial portion of Singapore's banking industry.

Banking Regulatory Structure of Singapore

It's critical to comprehend Singapore's banking regulations before traveling there to form a company. By doing this, you can clear up unpleasant surprises while opening a bank account for your company.

In Singapore, the Parliament must approve each legislative proposal before it can become a law or an act. In addition, the Monetary Authority of Singapore's relevant banking laws must be complied with by the banking industry.

Singapore's central bank, the Monetary Authority of Singapore (MAS), supervises all financial institutions in Singapore and ensures that the nation's price stability is consistent with the economy's long-term growth.

The MAS performs the following four primary duties:

  • Implement monetary policy
  • administer official foreign reserves
  • print money for Singapore
  • monitor payment systems

Different Types of Banks in Singapore

Knowing how to choose a suitable banking solution for your Singaporean business is made more accessible by thoroughly understanding the banking network. Every form of the bank will be the best choice for a particular kind of business.

There are primarily two types of banks in Singapore: domestic and foreign. Foreign banks typically have less freedom to offer financial services than domestic banks do.

1. DOMESTIC BANK

All local banks in Singapore currently function as entire banks. As permitted by the Banking Act, full banks offer various services, such as checking and savings accounts, ATMs, credit and debit cards, mortgages, and loans.

In Singapore, there are three leading local banks:

  • The Development Bank of Singapore Limited (DBS)

In 1998, DBS and POSB Bank were acquired, allowing DBS to increase its market share to four million customers. By size and assets, DBS is the biggest bank in Southeast Asia. Moreover, it is accessible from every part of the island because of its more than 100 offices and the most significant number of ATMs in Singapore.

  • United Overseas Bank Limited (UOB)

Wee Kheng Chiang, a businessman, started the United Chinese Bank (UCB) in 1935.

The bank currently operates 68 branches in Singapore and a network of over 500 offices throughout 19 nations and territories in Asia-Pacific, Western Europe, and North America. Southeast Asia's third-largest bank is UOB. It has more than 500 offices worldwide and about 70 physical branches in Singapore.

  • Overseas Chinese Banking Corporation

Singapore's second-largest bank has branches and representative offices in over 18 countries and territories. The bank received the esteemed title of World's Best Bank (Asia-Pacific) in 2019 from Global Finance Magazine. Evidently, it's Plus! For people who want to avoid getting into problems should their monthly balances not be met, savings accounts offer no fall-below costs.

2. FOREIGN BANK

Foreign banks are further divided into four categories:

Full Bank (FB) - Foreign banks that are recognized as Qualifying Full Banks (QFB) are permitted to increase the number of locations where they provide services to up to 25, join the domestic shared ATM network, and offer credit cards with short-term loans through local banks. HSBC, Bank of America, India Bank, Bank of China, and Standard Chartered are a few examples.

Wholesale Bank (WB) - With the exception of Singapore Dollar retail banking activities, wholesale banks engage in the same kind of banking activities as entire banks. In Singapore, every wholesale bank is a branch of a foreign bank. ING Bank, National Australia Bank, Deutsche Bank, etc., are a few examples.

Offshore Bank: Carry out the same operations as full-service and wholesale banks for transactions involving their Asian Currency Units (a division of accounting used by banks to record all foreign exchange transactions made in the Asian Dollar Market). Transactions between the banks in Singapore dollars are separately recorded in the Domestic Banking Unit (DBU). All offshore banks in Singapore function as outposts of foreign institutions. Examples include the Canadian Imperial Bank of Commerce, Bank of New Zealand, Bank of Taiwan, and Korea Development Bank.

Merchant Banks - corporate finance, share and bond underwriting, mergers and acquisitions, portfolio investment management, management consulting, and other fee-based services. With MAS' sanction, the majority of merchant banks have created ACUs by which they compete with the commercial banks in the Asian Dollar Market. Only banks, finance companies, shareholders, and businesses under their shareholders' control are permitted to make deposits or borrow from them in their DBU. ANZ Singapore Ltd., Credit Suisse Singapore Ltd., Barclays Merchant Bank Singapore Ltd., Axis Bank Ltd., etc.

Take away

Singapore's banking system is one of the primary factors in its success as a worldwide financial hub. Accordingly, the government has been implementing several policies to liberalize the financial sector and widen the investment window for domestic and foreign businesses.

Understanding Singapore's banking system may help you streamline your business processes if you decide to locate your company there, especially if you are in the financial services sector.

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