MAS releases monograph on Tenets of Effective Regulation

Tenets provide guidelines for Singapore finance system corresponding with review and tightening of international regulatory standards.

The Monetary Authority of Singapore (MAS) has issued a monograph “Tenets of Effective Regulation” to communicate MAS’ approach to developing effective regulation, according to a MAS report.

Following the global financial crisis of 2008/09, the importance of regulation to a stable financial system has taken on renewed importance. International regulatory standards are now being reviewed and tightened significantly. MAS supports and participates in these international reviews. While new international regulatory standards will mean some tightening too in Singapore, the shift will not be dramatic. This is because Singapore’s regulatory framework is prudent and its financial system is stable.

The “Tenets of Effective Regulation” guide the design and formulation of regulation, and explains the balanced regulatory approach, which continues to be relevant and effective in achieving the outcome of a sound and progressive financial services sector. The six Tenets are:

• Tenet 1: Outcome Focused
• Tenet 2: Shared Responsibility
• Tenet 3: Risk Appropriate
• Tenet 4: Responsive to Change and Cycles
• Tenet 5: Impact Sensitive
• Tenet 6: Clear and Consistent

These Tenets are intended to be generally applicable to all areas of our regulatory development work. The regulatory framework will be targeted at and sensitive to the risks it is aimed at, and more responsive to changes and risks in the industry. It will also be sufficiently flexible to set requirements that are commensurate with the risk profile and unique circumstances of particular financial institutions. Rules will be clear and not subject to frequent disruptive change as well as consistently applied to like activities conducted across sectors.

Teo Swee Lian, Deputy Managing Director, MAS, said, “Success in achieving effective regulation requires more than MAS setting demanding standards of itself. Industry has a critical role to play by taking shared responsibility for and ownership of the regulatory objectives, as well as instituting high standards of governance and controls for itself. Articulating this set of Tenets is a further step towards fostering shared understanding and ownership of our regulatory approach and objectives.”