Legislation

Payment Systems (Oversight) Act (Commencement) Notification 2006 (S329/2006)

Pursuant to the Payment Systems (Oversight) Act (Commencement) Notification 2006, the Payment Systems (Oversight) Act 2006 (the ‘Act’) has come into operation on 23 June 2006.

The Act provides for the new regulatory framework for payment systems and stored value facilities (‘SVF’) in Singapore. A payment system is a funds transfer system or other system that facilitates the circulation of money and includes any instrument and procedure that relates to the system. A SVF is a facility that is used for payment of goods or services up to its stored value.

Regulations issued to implement the Act

The Act empowers the Monetary Authority of Singapore (the ‘MAS’) to make regulations under the Act. In exercise of its power, the MAS has issued the following Regulations to implement the provisions of the Act. The following Regulations have also come into operation on 23 June 2006:

1    Payment Systems (Oversight) Regulations 2006

2    Payment Systems (Oversight) (Composition of Offences) Regulations 2006

3    Payment Systems (Oversight) (Exemption) Regulations 2006

4    Payment Systems (Oversight) (Singapore Dollar Cheque Clearing System and Inter-bank GIRO System) Regulations 2006

5    Payment Systems (Oversight) (Transitional and Savings Provisions) Regulations 2006

6    Payment Systems (Oversight) (Designated Payment Systems) Order 2006

7    Payment Systems (Oversight) (Exclusion of Single Purpose Stored Value Facilities) Order 2006

8    Payment Systems (Oversight) Act (Commencement) Notification 2006

Two other Regulations are also issued under the Interpretation Act and the Banking Act respectively pursuant to the commencement of the Act:

9    Interpretation (Payment Systems (Oversight) Act 2006 – Fees) Order 2006

10  Banking (Exemption from Restrictions on Issue of Stored Value Cards) (Cancellation) Notification 2006

Stored Value Facility Guidelines

On 22 June 2006, the MAS issued a set of guidelines on SVF. The Stored Value Facility Guidelines contain broad principles on the sound practices and risk mitigation measures that holders of SVF schemes should adopt in relation to their SVF schemes. Where appropriate, a holder may adapt the sound practices to suit the size, complexity and risk profile of its SVF.

Banking (Amendment No 2) Regulations 2006 (S325/2006)

Pursuant to the Banking (Amendment No 2) Regulations 2006 (the ‘Regulations’), a new reg 23 had been introduced in the Banking Regulations to allow banks in Singapore to enter into arrangements to offer Murabaha investment products. This comes in the wake of the amendment of the Banking Regulations last year to allow banks to carry on Murabaha financing.

By way of background, s 30 of the Banking Act generally prohibits a bank in Singapore from carrying on non-financial businesses. However, under s 30(1)(d) read with s 78 of the Banking Act, the Monetary Authority of Singapore (the ‘MAS’) is empowered to prescribe any business or class of business which a Singapore bank may carry on, subject to such conditions as may be prescribed.

The new reg 23 of the Banking Regulations provides for a ‘prescribed purchase and sale business.’ It states that the business of purchasing and selling assets is prescribed as a business that may be carried on by a bank in Singapore for the purpose of s 30(1)(d) of the Banking Act, if such business is carried on under the following arrangement:

1    for the purpose of making funds of a customer available to a bank, the customer appoints the bank or any other person as agent, to purchase on his behalf, an asset, in circumstances where the asset is existing at the time of the purchase;

2    an amount of money (the original price) is paid by the customer to the bank or such other person referred to in the above paragraph, as the case may be, for the purchase of the asset;

3    the bank purchases the asset from the customer at a price (the marked-up price) that is greater than the original price, and sells the asset;

4    the bank and customer, respectively, do not derive any gain or suffer any loss from any movement in the market value of the asset other than the difference between the marked-up price and the original price (which represents the profit or return to the customer for making funds available to the bank); and

5    the marked-up price or any part thereof is not required to be paid by the bank to the customer until after the date of sale of the asset by the bank.

The difference between the marked-up price and the original price represents the return to the customer on the investment constituted by the funds, in the amount equal to the original price, made available by it to the bank.

The bank is required to notify the MAS of its commencement of the business of purchasing and selling assets in accordance with the Regulations.

Elizabeth Wong

Allen & Gledhill