On 7 May 2021, The Monetary Authority of Singapore (“MAS”) consulted on proposed changes to the Guidelines on Corporate Governance for Designated Financial Holding Companies, Banks, Direct Insurers, Reinsurers and Captive Insurers. The consultation closes on 18 June 2021.
The Guidelines on Corporate Governance in Singapore
The Guidelines on Corporate Governance comprises principles and provisions of the Code of Corporate Governance which apply to all financial institutions within scope and some additional guidelines for Singapore incorporated financial institutions. The current Code of Corporate Governance was revised in 2018 to reinforce board competencies and place greater emphasis on disclosures of relationship between remuneration and value creation. The revision also increased focus on the interests of stakeholder groups other than shareholders.
The consultation paper proposes to revise the Guidelines on Corporate Governance to incorporate 2018 changes to the Code of Corporate Governance as well as international standards and industry best practices.
Proposed Revisions to the Code of Corporate Governance
Greater responsibilities for board of directors
There is greater emphasis on expected roles and responsibilities of board of directors as set out in the Basel Committee of the Banking Supervision Core Principles for Effective Banking Supervision and the International Association of Insurance Supervisors Core Principles. The Board is expected to review financial institutions corporate governance framework, culture and conduct framework, business objectives and strategies on an annual basis. There is a requirement to have an appropriate risk management system and adequate internal controls to support the financial institution’s risk appetite.
Recommendations for oversight of remuneration practices
The Guidelines on Corporate Governance sets out recommendations for remuneration practices. It is expected that financial institutions design and implement appropriate remuneration policies for employees with active oversight and monitoring of effectiveness of policies by senior management. Effective oversight includes ensuring performance evaluation and conducting independent annual reviews which must take into account both financial and non-financial factors.
Extended remuneration practices for executive officers
Where remuneration is variable, it should be aligned with long-term value-creation and subject to deferral arrangements to ensure they are consistent with the financial institution’s long-term objectives and financial soundness. MAS proposes to extend the remuneration requirements for executive officers to material risk-takers given that their decisions or actions could impact the financial institution’s risk profile.
Documentation for unresolved concerns of independent directors
As part of the Guidelines on Corporate Governance, MAS requires unresolved concerns for independent directors, particularly those on the running of the company, be documented in the minutes of the board meetings. MAS proposes to include this expectation as a new additional guideline under the Guidelines on Corporate Governance.
Experts may be appointed as a member of the Board Risk Committee
The Board Risk Committee of a financial institution has statutory responsibilities under the Corporate Governance regulations for overseeing the establishment and operation of an independent risk management system for the financial institution, as well as ensuring the adequacy of the risk management function of the financial institution. To achieve this, the financial institutions, as part of Guidelines on Corporate Governance, are expected to appoint independent directors with skills and competency relevant to their business strategies and objectives. Given the limited pool of resources, some financial institutions have resorted to utilising subject matter experts in their place. MAS proposes that an expert, who is not a director, may be appointed as a member of the Board Risk Committee. Appropriate notifications must be provided to MAS and the individuals must commit to appropriate undertakings for proper accountability.
Please refer here to read our initial summary on corporate governance requirements in Singapore.
How can Argus Global assist?
At Argus Global our team of consultants specialise in regulatory compliance for financial institutions. We are able to assist clients with the following:
- Draft and incorporate corporate governance requirements into current policies
- Draft corporate governance policies
- Conduct gap analysis on existing policies against the Guidelines on Corporate Governance and provide recommendation for improvements
- Provide regulatory advice on the necessary steps to take to address and implement the Guidelines on Corporate Governance.
Please reach out to us for an initial discussion at firstname.lastname@example.org.