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MAS Issues Guidelines to Strengthen Responsibility and Ethical Behaviour in the Financial Industry

Sep 28 2020 | by OrionW

The Monetary Authority of Singapore (MAS) has released new Guidelines on Individual Accountability and Conduct (Guidelines) that are intended to strengthen the accountability of senior managers in key functions in financial institutions (FIs) and to promote ethical behaviour in FIs. 

The Guidelines, which were issued on 10 September 2020 and take effect on 21 September 2021, were accompanied by a set of frequently asked questions (FAQs) and an Information Paper on Culture and Conduct Practices of Financial Institutions (Information Paper).

The Guidelines set out five outcomes an FI should achieve to promote clear accountability and proper conduct: 

Outcome 1: Senior managers responsible for managing and conducting the FI’s core functions are clearly identified.

Outcome 2: Senior managers are fit and proper for their roles and held responsible for the actions of their employees and the conduct of the business under their purview.

Outcome 3: The FI’s governance framework supports senior managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.

Outcome 4: Material risk personnel are fit and proper for their roles and subject to effective risk governance, appropriate incentive structures and standards of conduct. “Material risk personnel” are individuals who can significantly affect the FI’s safety and soundness, or cause harm to a significant segment of the FI’s customers or other stakeholders.

Outcome 5: The FI has a framework that promotes and sustains the desired conduct among all employees. 

The Information Paper sets out MAS’s approach toward culture and conduct in FIs, the outcomes they should work towards and the examples that FIs can adopt.  However, it does not prescribe a “one-size-fits-all" approach to achieve the Guidelines’ five outcomes. Practices evolve over time and FIs gain experience as their circumstances change.  MAS encourages FIs to develop their best practices commensurate with their business and risk profiles.  MAS will continue to engage FIs, their boards, senior management and other employees on the adequacy and effectiveness of their practices on culture and conduct in its ongoing supervision.

Financial Institutions Covered by the Guidelines

The Guidelines apply to FIs with a headcount of 50 or more.  The headcount should include all personnel who engage in or support the FI’s core management functions in Singapore.  FIs that start with a headcount below the threshold but subsequently cross the threshold as they expand are given 12 months’ transition period to apply the specific guidance under the Guidelines.  FIs with a headcount of 50 or more but falls under the threshold are encouraged to maintain their existing framework and systems which they have put in place to implement the specific guidance under the Guidelines.

Disclaimer: This article is for general public information only and does not constitute legal advice.