Regulations[ edit ] A key part of bank regulation is to make sure that firms operating in the industry are prudently managed. The aim is to protect the firms themselves, their customers, the government which is liable for the cost of deposit insurance in the event of a bank failure and the economy, by establishing rules to make sure that these institutions hold enough capital to ensure continuation of a safe and efficient market and able to withstand any foreseeable problems. The main international effort to establish rules around capital requirements has been the Basel Accordspublished by the Basel Committee on Banking Supervision housed at the Bank for International Settlements. This sets a framework on how banks and depository institutions must calculate their capital.
Written by Ng E-Jay 18 March In an attempt to shore up the faltering reputation of Singapore as a financial hub and to beef up regulations governing the marketing and sale of investment products, the Monetary Authority of Singapore MAS released a draft consultation paper last Thursday outlining what is acceptable sales practice and what crosses the line into mis-selling and deception.
See here and here. The draft consultation paper is open for public feedback until 23 April.
Some of the key recommendations include: However, three issues remain inadequately addressed, which I discuss below. Product Pushing In my opinion, inadequate attention has been paid to the compensation structure of Representatives and insurance agents selling financial products which gives them an overwhelming incentive to push products, as well as the practice of many managers who set quotas for their sales representatives primarily based on volume of products sold, neglecting intangible issues such as fostering good client-representative relationships and forging long term trust between customer and company.
Although representatives working in banks often get a reduced commission payout in exchange for a Bank regulation and fsa salary, they are also under tremendous pressure to generate high sales volume in this competitive investment market.
These factors lead to a sales climate that strong favours product pushing over concentrating on what is best for the client. For instance, I personally know of representatives who are forced to sell investment-linked insurance products ILPs to their clients even though many of these clients would be far better off purchasing term policies and investing the remainder of their money in products like Exchange Traded Funds or low-load mutual funds which have far lower distribution cost structures than ILPs.
High commission-based remuneration and the intense focus of managers on sales volume are the main reasons why product pushing remains prevalent. These factors are not new to the insurance or investment industry, and is a global phenomenon that has been entrenched for many decades.
Some steps towards dealing with the evils of product pushing, such as introducing fee-based remuneration, which compensates representatives based on the financial plan he or she produces for the client rather than the volume and type of products sold, have been initiated in Singapore.
Providend Pte Ltd, for example, is a financial advisory company that has introduced fee-based remuneration, and they have experienced some measure of success attracting clients with their independent, platform-neutral model.
MAS has not done enough to aggressively steer the financial planning industry towards this healthier alternative. Other jurisdictions are studying ways to address this issue.
At this stage, MAS will formalise the expectation in the Fair Dealing Guidelines for the board and senior management to focus on ensuring that the remuneration structures are not only driven by sales volume but better align the interests of representatives and customers. I would like to see far greater focus on this issue as well as a greater push toward fee-based remuneration which would go a long way towards promoting truly independent and client-centric financial advice.
Whistle Blowing There also needs to be a better whistle-blowing mechanism put in place by MAS allowing representatives and sales managers to confidentially report on malpractices taking place within their firms.
Last year in December, Mr Tan Kin Lian revealed on his blog that he was approached by a bank relationship manager who wished to confess to giving wrong information to investors of failed credit linked notes due to his ignorance about the risks of the product. According to Mr Tan, this relationship manager had agreed to sign a statement to this effect.
A wrongful act cannot be covered up by telling the Representative to keep quiet about it. From this example, it can be seen that there is an urgent need to institute a robust whistle-blowing procedure that will allow sales representatives and managers to alert the authorities to wrongdoing and compel the authorities to take swift follow-up action.
Transparency and Accountability Of course, all the preceding discussion would be in vain if there is inadequate transparency and accountability by MAS to the general public. Despite all the actions taken by MAS and the banks to address the fallout of the Lehman-linked structured products fiasco, MAS has never revealed why it allowed those dubious products to be sold to the unsuspecting public in the first place, and why it allowed those products to be marketed to retirees.
Only large institutions should ever dabble in such products, as it is only they who would have the research capabilities to fully comprehend such products and manage their own risk and exposure.A capital requirement (also known as regulatory capital or capital adequacy) is the amount of capital a bank or other financial institution has to hold as required by its financial heartoftexashop.com is usually expressed as a capital adequacy ratio of equity that must be held as a percentage of risk-weighted assets.
These requirements are put into place to ensure that these institutions do not.
Danske Bank will hold an extraordinary general meeting on Friday, 7 December at pm at DGI Byen in Copenhagen. It is now possible to read the agenda, request for admission cards and vote either by correspondence or by proxy. ii Bank of England and Financial Services Act (c. 14) Consequential and transitional provision 16 Amendments relating to Part 1 17 Saving and transitional provision relating to Part 1 PART 2 FINANCIAL SERVICES The regulators.
Topics. FSA will hold the Opening Ceremony of World Investor Week NEW; FSA Weekly Review NEW Update on Progress toward Further Efficiency and Transparency in the Screening Procedures for Licensing and Registration of Financial Businesses. Firms in the banking sector (banks, building societies, investment firms and credit unions) need to provide regulatory returns to the Prudential Regulation Authority (PRA).
This page explains the returns and how firms should report them. To enable the Bank to meet the objectives of a central bank, it is vested with comprehensive legal powers under the following legislation to regulate and supervise the financial system.