Singapore’s central bank said it would allow foreign takeovers of the nation’s three finance companies, as part of wider industry changes that seek to boost lending to small and medium-sized enterprises (SMEs).
The Monetary Authority of Singapore (MAS) 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 yesterday.
“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 central bank 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 percent 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.
Listed companies Hong Leong Finance Ltd (豐隆金融), Sing Investments & Finance Ltd (星金融發展) and Singapura Finance Ltd (富雅金融) currently hold about S$7 billion (US$4.9 billion) of outstanding loans to SMEs, or just under 9 percent of the total. They also have S$16 billion in combined assets.
After the announced changes, which are to be implemented in several stages starting this year, the limit on the companies’ aggregate uncollateralized business loans would be increased to as much as 25 percent of its capital funds, from the current 10 percent, the central bank said.
The cap on such loans to a single borrower would be raised to as much as 0.5 percent of capital funds, from S$5,000 now.
Finance companies would also be allowed to offer current accounts, fund transfers and checking services to business customers.
At the same time, MAS said it would 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.
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