SINGAPORE (May 07): Monetary Authority of Singapore says it is considering whether Singapore allows digital-only banks to operate in the country.
The MAS review follows the decision by regulators in Hong Kong to issue virtual banking licenses.
“We have been engaging relevant stakeholders to ascertain the unique value that such entrants could bring to our banking landscape, and understand how potential risks will be managed and contained.” the Monetary Authority of Singapore said in an emailed reply to questions from Bloomberg News.
In its statement, the MAS said digitalization isn’t new to Singapore’s banking industry, as the local lenders have been allowed to pursue digital-only business models since 2000.
DBS Group Holdings Ltd., Oversea-Chinese Banking Corp., and United Overseas Bank Ltd. all have digital strategies. They have to compete with home-grown financial-technology firms as well as the local branch networks of HSBC, Citigroup Inc., and other foreign banks.
Referring to the threatens from virtual banking’s trend, “To my mind, that’s just basically giving a few more banking licenses,” DBS Chief Executive Officer Piyush Gupta said in a recent interview with Bloomberg News.
For Piyush Gupta, the real challenge is if the regulators create an unlevel playing field, and let the new bank licensees come in and do banking on different terms.
“Virtual banks typically have lower operational costs than traditional lenders that rely on brick-and-mortar branch networks,” Gupta said during the DBS’s annual shareholder meeting last month.
He said a new digital bank could generate $100 of income from a cost base a little above $30. In contrast, DBS’s cost-to-income ratio stood at 44 percent last year.