Singapore’s central bank to allow foreign acquisitions of finance companies
SINGAPORE’S CENTRAL BANK said it will allow foreign takeovers of the country’s three finance companies, as part of wider industry changes that seek to boost lending to small and mediumsized enterprises.
The Monetary Authority of Singapore is prepared to consider applications for mergers or acquisitions if any prospective partner “commits to maintaining SME financing as a core business” of the finance company being targeted, it said in a statement Tuesday.
“This will accord finance companies greater flexibility to explore strategic partnerships and innovative business models that can strengthen their SME financing business,” MAS said. It also unveiled plans to relax lending limits for the firms.
Shares of Singapore finance companies rose after the announcements. The MAS issued a statement on Monday outlining a series of plans to support and implement recommendations made by an economic panel last week. The Committee on the Future Economy presented strategies aiming to support growth at an average rate of 2% to 3% annually in coming years.
Finance companies in Singapore are licensed to take deposits and grant loans to individuals and businesses, with a focus on the SME sector. Hong Leong Finance Ltd., Sing Investments & Finance Ltd. and Singapura Finance Ltd., which are listed in the nation’s stock market, currently hold around S$7 billion ($4.9 billion) of outstanding loans to SMEs, or just under 9% of the total. They also have S$ 16 billion in combined assets.
Hong Leong Finance shares climbed 4.4%, the most since June 2016, as of 11:28 a.m. in Singapore. Sing Investments rose 1.2%, while Singapura Finance gained 2.9%.
After the announced changes, which will be implemented in several stages starting this year, the limit on the companies’ aggregate uncollateralized business loans will be raised to as much as 25% of its capital funds, from the current 10%, MAS said. The cap on such loans to a single borrower will be raised to as much as 0.5% of capital funds, from the current S$5,000.
Finance companies will also be allowed to offer current accounts, fund transfers and chequing services to business customers. At the same time, MAS said it will require companies to enhance their corporate governance and risk management, with stricter rules on transactions involving shareholders and limits on exposure to the property sector.
Profits at Singapore’s three publicly traded banks, which account for most credit to SMEs, have come under strain from a weakening domestic economy and increased charges for loan losses tied to the oil and gas industry. Asian currencies have also faced pressure as investors raised bets for U.S. interest-rate increases this year, adding to debt costs. — Bloomberg